The UK clothing and homeware retailer Next has reported a smaller than expected drop in sales in recent weeks but expects a bigger decline in the spring quarter because of the cost of living crisis and colder weather than last year.
Next, which has about 500 stores and is seen as a good barometer of consumer spending, said sales were down by 0.7% from a year earlier in the 13 weeks to 29 April, better than the firm’s guidance of a 2% fall.
Total sales including markdown and clearance sales rose to 1.2% due to higher clearance sales. Last year there was little stock to clear, as a result of stock shortages in the run-up to Christmas 2021.
Next, run by its longstanding chief executive Simon Wolfson, has warned of a “very challenging” 2023 as shoppers struggle with soaring food and energy bills. It has signalled price rises of 7% on its spring and summer ranges, dropping to 3% over the autumn and winter, as shipping and other costs ease.
The company stuck to its sales and profit outlook for the full year, with sales forecast to fall by 1.5% and pretax profit forecast to be £795m, down from last year’s record annual profits of £870m.
Sales in the second quarter are now forecast to be down by 5% on last year, rather than down 4%. Next said holiday clothing sales leading up to Easter might have been earlier this year and boosted the first quarter.
“Shareholders might wonder why we are so cautious for sales in the second quarter,” the company said. “The second quarter last year benefited from unusually warm weather and pent-up demand for events such as weddings, proms etc.”
This time last year, people celebrated the end of Covid lockdowns by holding parties, weddings and other events, some of them delayed by the pandemic, and shopped for party dresses as well as suits amid a return to office working. Warm weather boosted demand for shorts, sundresses and other holiday clothes as more people went away.
Other retailers such as Primark have complained that the unusually cold and windy weather has held back sales of spring and summer clothing.
Next shares rose by 2.2% on Thursday morning, making it one of the top risers on the FTSE 100.
