Company - - Jan 04,2017
Leading clothing retailer Next’s shares plunged by 9 percent as it reported falling sales as rising inflation begins to affect customers’ ability to spend on clothes.
Next announced a major cut in its 2016 profit forecasts and warned of a challenging 2017. The retailer said that its full price sales were down by 0.4 percent in the 54 days to 24 December, with annual profits now set to be at the lower end of company’s expectations.
The firm forecasts full year profits of 2016 would be 792 million pounds, compared with previous anticipations of 785m to 825 million pounds. Next’s sales had slumped in the end of season on Boxing Day by more than 7 percent, which costs the company 3 million pounds.
Next said sales in 2017 could be hit as rising inflation minimizes earnings growth and further reduces consumer spending. Next shares were down 4.35 pounds, or 9 percent to 43.35 pounds in London.
The company is run by Lord Wolfson, prominent Brexit Vote Leave patron, who said that expectations are of a cyclical slowdown in consumer spending on clothing and footwear, which began in November 2015, to continue into 2017.
Wolfson also warned that the devaluation of pound following the Brexit vote would push up the price of clothing staples that the company sells all year round, such as T-shirts by up to 5 percent; depressing sales revenue by about 0.5 percent.
Next was the biggest loser in early trading on the FTSE 100, with shares going down higher than 10 percent.
Next’s despondent forecast for 2017 has dragged down other fashion retailers as well, with Marks & Spencer and Debenhams falling by about 5 percent and Primark’s owner, Associated British Foods, falling more than 3 percent. Shares in Burberry, Ted Baker and Tesco also went down after the announcement.