Next set to report 13% drop in sales over Christmas

Next CVA clause

Next is set to downgrade its full-year profit forecast amid falling sales in a Christmas trading update later this week.

According to analyst firm Jefferies the fashion retailer is due to post a 12.7 per cent drop in in-store sales over the busy Christmas period, becoming the latest retailer to be marred by a disappointing fourth quarter.

It is also predicted to downgrade its full-year profit guidance by three per cent amid an update to the market on Thursday.

This will see its current guidance of £727 million drop to around £705 million, a significant drop from last year’s £726 million.

Though its in-store sales are set to drop, its online arm is expected to provide some respite with a 10 per cent increase.

“The combination of mild weather and Brexit-induced UK consumer weakness is bound to have impacted Next’s Christmas performance,” Jefferies’ James Grzinic said.

This follows news that the retailer’s sales growth in the three months to October 27 had slowed to 1.3 per cent, with an eight per cent drop in physical sales being offset by a 12.7 per cent rise in online sales.

Grzinic added that the outlook for retailers next year largely depends on the outcome of Brexit, for which Next’s Lord Wolfson was a staunch campaigner.

“Looking at the early months of 2019, much of the outlook continues to be dictated by what shape the Brexit discourse will take,” he said.

“Whether UK consumers take full advantage of their improved ability to spend (with disposable income growth currently at 3%) will depend on politicians steering the Brexit process through calmer waters.”

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