Next warns of tough year ahead

CLOTHES retailer Next has warned that sales and profit growth in the next year would be modest, citing concerns over the eurozone debt crisis, a credit squeeze and rising unemployment.

Shares in Next fell nearly 4% yesterday after the company said it would meet profit forecasts for the year to the end of January — guiding to a figure £7 million (€8.2m) either side of £565m — but expressed concern about the outlook for the following year.

“Our internal budgets for the year ahead show modest growth in overall Next brand sales with profit before tax only slightly up on this year,” the company said.

Analysts at Numis cut their 2012-2013 profit forecast by 3% to £574m.

Chief executive Simon Wolfson said the eurozone crisis has begun to negatively impact consumer behaviour.

“My sense is the underlying economic situation is slightly worse than it was in September and that the only thing that’s really changed is the situation in Europe,” he told Reuters.

Wolfson, a prominent supporter of Britain’s ruling Conservative Party who sits in the upper house of Parliament, said the crisis had put the brakes on British employment growth and affected consumer sentiment, business confidence and the banking sector.

Kicking off the post-Christmas British retail reporting season Next, which has a long-standing policy of never going on sale before Christmas, said total sales, excluding VAT sales tax, rose 3.1% year-on-year in the August 1 to December 24 period.

Sales more than 500 stores in Britain and Ireland fell 2.7%. But this was offset by a 16.9% leap in sales at its home shopping service Next Directory.

Next said it was disappointed with sales in November and December as macro headwinds and high levels of competitor discounting took their toll.

Wolfson said rivals discounting was “more than I’ve ever seen before”.