Retail giant Next takes another sales hit

A "difficult" third quarter forces it to downgrade its annual sales guidance for the fourth time this year...

Retail giant Next takes another sales hit

Steve Parsons / PA

Next has revealed that its retail store sales fell 5.9% in the three months to the end of October, citing heavy discounting and unfavourable comparisons to last year's performance as being behind the slump.

Sales at its Next Directory online division were flat for the quarter.

It means the Leicester-based retailer has offered a "marginally lower" annual sales guidance than the one it gave in May, the fourth time this year that its expectations have fallen.

It now expects sales to be between 1.75% lower and 1.25% higher than the previous year.

The poor quarterly results were not entirely unexpected – last month the chain had warned that Q3 would be "difficult", with chief executive Lord Wolfson blaming warm September weather putting people off buying winter clothes. Earlier in 2016, Next had warned that retail could be facing its toughest year since the onset of the financial crisis in 2008. Wolfson cited "economic and cyclical factors working against us" at the time.

While Next's total sales have increased slightly so far this year, this is down to the fact that sale items are outselling full-price items. The number of items sold at full price has dropped 1.5%.

Shares in the major High Street player have fallen by more than a third this year. Early trading today saw a 4.4% rise two their highest level in nearly two months, as cost savings have allowed Next to maintain its full-year central profit forecast at £805 million.

George Salmon, equity analyst at Hargreaves Lansdown, told the BBC News:

"2016 is proving something of an annus horribilis for Next. While a tough quarter was expected, the group has been forced to trim sales expectations for the year.

"With the weaker pound meaning imported textiles are now more expensive, Next will need to make some tough choices on how it tackles this extra cost."