Sales growth slows down at Next

The fashion and homewares chain reported a 1.3% rise in full-price sales for the three months to October 27 – up 2% including interest income from nextpay customers.

It said high street retail sales tumbled 8%, while online sales rose by 12.7%.

The result marks a slowdown on the 4.5% rise in full-price sales seen in its first half.

Despite the high street sales drop, Next is continuing to invest heavily in its stores, opening a vast new branch at Merry Hill shopping centre this summer and about to move into an expanded store on the St Johns retail park in Wolverhampton.

The update comes after the latest figures from the Confederation of British Industry (CBI) showed retail sales growth slowed more than expected in October as consumers reined in their spending following a summer shopping spree driven by warm weather and the World Cup football tournament.

However, Next kept its full-year guidance unchanged, with the group pencilling in annual sales growth of 3% and a 0.1% rise in group pre-tax profit to £727 million.

The group upped its full-year profit guidance in September after a better-than-expected first half, posting interim pre-tax profits up 0.5% at £311.1 million.

But last month's earnings cheer came as it also warned over the threat of gridlock at ports and price hikes from increased tariffs if the UK crashes out of the European Union with no deal.

In the document outlining the group's Brexit no-deal contingency plans, Next also cautioned that another sharp fall in the value of the pound and increased tariffs also posed a threat.

Next said in the "unlikely event" that free-trade agreements were not put in place, it could send the cost of imported goods soaring by up to around £20 million, which could push up prices by around 0.4%.

Tom Stevenson, investment director from Fidelity Personal Investing’s share dealing service, commented: “Next continues to be a beacon of light in a bleak retail sector. But third quarter full-price sales growth of 2%, bang in line with expectations, was only possible thanks to ongoing strong growth in the retailer’s online and catalogue business and growth in credit income. Sales on the High Street are declining as fast as everyone else’s as consumers sit on their hands and digital disruption continues to devastate the sector.

“Next restated its full year guidance today, so full price sales in the year to January should be 3% higher, profits broadly flat at £727m and earnings per share 5% better. The shares trade at roughly 12 times those expected earnings and yield a little over 3%, the shares, which reflects the market’s view that Next remains a port in the storm on the beleaguered High Street.

“Three months ago, chief executive Lord Wolfson highlighted the threat of Brexit. With the summer’s World Cup and weather boost now fading in the memory, the next few months will be a significant challenge for the retail sector but no business is better placed to navigate the storm than Next.”