Tough start for Next, H&M

Two of Europe’s biggest fashion retailers, Next and Hennes & Mauritz, have endured a tough start to the year, hit by a combination of unhelpful weather and economic headwinds.

Retailers across Europe are battling a prolonged squeeze in consumer incomes as governments try to reduce their deficits. Freezing wet weather has also discouraged shoppers.

In Britain, two thirds of GDP is generated by consumer spending, so a poor first quarter would increase the chances of the country dipping into a third recession in four years.

Next, Britain’s second-biggest clothing retailer, said yesterday that trading since the start of February was quiet, with sales at the bottom of a 1%-4% target growth range for 2013-14. It had issued an annual growth target of 1.%-4% in January.

It also reported a 9% rise in 2012-13 profit, in line with previous guidance.

H&M, Europe’s No 2 fashion retailer, said it will speed up store expansion in the face of weak European demand after unusually big markdowns pushed profits down by 13% in its first quarter, more than expected.

Next, known for making and achieving precise earnings guidance, said it expected sales to pick up.

“Unusually cold weather is definitely suppressing sales of summer stock that we’d normally be selling,” chief executive Simon Wolfson told Reuters.

“How much difference that will make we’ll only know when we see some warmer temperatures and more spring-like weather.”

Mr Wolfson said the firm is budgeting for sales in existing stores to be moderately less in the 2013-14 financial year than in the previous year, with growth in sales coming from new space and the firm’s directory online and catalogue business.

— Reuters


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