Next expected to report further profit decline

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Christmas Trading

Next is set to reveal its Christmas trading figures this week with analysts predicting further disappointing results for the fashion giant.

Reports from Next’s chief executive Lord Simon Wolfson exclaiming late last year that conditions on the high street remained “extremely volatile” have led brokers Numis to predict a 0.5 per cent drop in sales in the two months to Christmas eve.

This follows a gradual decline in sales over the past year, posting a 7.7 per cent drop in high street sales in its third quarter, despite its directory arm rising 13.2 per cent. It has also predicted its central profit to come in a £717 million, marking a near 10 per cent fall on last year.

Its high street sales margins will have been put under further pressure over the Christmas period as footfall data suggests a slow year for Christmas sales. Figures from Springboard suggest Boxing Day footfall dropped 5.9 per cent as well as 7.1 per cent in the last trading week before Christmas.

“The latest news that footfall on the high street for the Boxing Day sales was lacklustre won’t make pleasant reading for investors in Next and other retailers,” The Share Centre’s research analyst at Graham Spooner said.

Shore Capital’s Clive Black added that the combination of rising costs due to the Brexit hit sterling and drop in consumer confidence is likely to see numerous retailers report struggles.

“We continue to highlight that many retailers expected flattish sales and while there was some evidence of early discounting there has been limited evidence of panic activity, last seen at Christmas in the height of the financial crisis,” he said.

“We also point out that most retailers have been preparing for a tougher trading environment manifested in lower stock commitments and adjusted operating schedules.

“Going into the January reporting season we expect upgrades and downgrades and some in-between.”

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