Sep 9, 2008
Reading time
2 minutes
Download the article
Click here to print
Text size
aA+ aA-

Next's first-half profit fall to add to retail gloom

Sep 9, 2008

LONDON (Reuters) - Fashion retailer Next is expected to report a 14 percent fall in first-half profit on Wednesday, starkly illustrating how deteriorating economic conditions have deterred shoppers from spending.

The country's second-largest clothing retailer by value, according to Verdict Research, is not expected to publish a current trading statement with its results but is expected to reiterate a downbeat assessment of the second half and beyond.

Next is set to report an underlying profit before tax of 171 million pounds for the 26 weeks to July 26, according to the average of six analysts polled by Reuters, down from 198 million in the same period last year. Analysts' estimates range from 166 million to 177 million.

The profit fall reflects a sales decline already reported in a July 30 trading statement, partly offset by gross margin gains.

The update showed like-for-like full-price sales in the 353 Next Retail stores unaffected by new openings fell 6.0 percent, while sales in the Next Directory home shopping operation increased 2.0 percent.

The group also said in the update it remained "very cautious" on the outlook and was preparing for Next Retail's second-half full-price like-for-like sales to be down by a similar amount to that of the first half, anticipating its customers' discretionary spending would continue to be squeezed.

"In the current retail environment we see significant adverse risks to estimates ... We would expect management's outlook statement to remain resolutely cautious," said analysts at Landsbanki in a preview note.

Many UK retailers are struggling as consumers curb spending because of higher fuel, food and mortgage costs. Fashion retailers have also had to cope with a second consecutive summer of dismal weather.

Last month the Confederation of British Industry, the employers' organisation, said retail sales in August fell at their sharpest pace in at least 25 years.

In June the UK's biggest clothing retailer Marks & Spencer Group Plc (MKS.L) issued a shock profit warning, wiping out a quarter of its market capitalisation.

Analysts expect Next to maintain its interim dividend payout at 18.0 pence.

For Next's full year to the end of January 2009 they are forecasting a pretax profit of about 435 million pounds, down from 498 million in the previous year.

The group's shares have halved over the last year, underperforming the DJ Stoxx European retail index by 25 percent.

The stock closed on Friday at 1,083 pence, valuing the business at 3.75 billion pounds.

© Thomson Reuters 2021 All rights reserved.