Next expecting a dent in profits if weather remains warm

The fashion retailer issued an unscheduled trading update where it stated that during August the cooler weather was responsible for several weeks of high sales, but the effect was promptly reversed during September.  This resulted in the company’s third quarter sales increasing by 6%, instead of the 10% forecast.

The company forecast pretax profits for the year ending January would increase by around 17% to £815m.  This prediction has not been adjusted, but the company stated that it may be lowered if the weather remains mild. Next said that in their experience lost sales are usually regained when the weather turns, but if this warm weather, which is unusual for this time of year, continues during October, they will have to lower their full-year profit expectancy range from £815m to £7756m.

This statement from Next is an indication that fashion retailers are experiencing problems with sales of winter clothing due to the weather remaining at summer levels.

New Look, Debenhams, House of Fraser and Marks & Spencer are all offering early new season discounts. Share prices for most of the retailers have declined. Next saw strong August sales, partly at M&S’ expense, which saw a decline of 0.6% in its share of the clothing market.

  

Nick Bubb, a retail analyst, said that Next is probably being cautious as they are due to enter investor meetings this week.  Next said it chose to publish its statement to the stock exchange because it is due to have meeting with large shareholders who will enquire about trading due to the heavy discounting that is happening on the high street.  They said that the release of the information would allow it to have open conservations during these meetings.