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Subdued sales at Next rattle UK clothing retailers
November 1, 2017 / 7:23 AM / 21 days ago

Subdued sales at Next rattle UK clothing retailers

LONDON (Reuters) - Quarterly sales at British clothing retailer Next (NXT.L) missed some analysts’ forecasts as it blamed a mild October and “extremely volatile” trading, sending shares across the sector lower on Wednesday.

FILE PHOTO: People outside a branch of Next retail in London, Britain, September 15, 2016. REUTERS/Toby Melville/File Photo

The news is the latest sign a faltering economy is hitting consumers and adds to the dilemma for the Bank of England as it considers whether to lift interest rates for the first time in ten years on Thursday to curb inflation.

Next shares had risen 26 percent in the last three months on hopes it was turning the corner after a tough two years. But they were down 8 percent at 4,521 pence at 1102 GMT, while rivals Debenhams (DEB.L), Marks & Spencer (MKS.L) and Primark-owner AB Foods (ABF.L) were down between 3.4 and 5.2 percent.

A survey published by the Confederation of British Industry last week showed British retail sales plummeted in October at the fastest pace since early 2009, when the country was last in recession. Department store chain John Lewis has also posted five straight weeks of sales declines.

“The outlook for UK consumption next year appears to be deteriorating, and the channel shift from stores to online remains very concerning, given that Next is continuing to add retail space,” said Credit Suisse analysts, who have an “underperform” rating on the stock.

Next, which trades from more than 500 stores in the UK and Ireland and the Directory internet and home shopping business, said sales in August and September were up strongly on last year as cooler temperatures drove demand for autumn/winter ranges. However, sales dipped in October, which was unseasonably mild.

Next’s total full-price sales rose 1.3 percent in the 13 weeks to Oct. 29, its fiscal third quarter, below some analysts’ expectations for a rise of over 4 percent but ahead of the second quarter’s 0.7 percent increase.

FILE PHOTO: A worker dresses a mannequin in a shop window display at a branch of clothing retailer Next in London's West End, September 30, 2014. REUTERS/Andrew Winning/File Photo GLOBAL BUSINESS WEEK AHEAD SEARCH GLOBAL BUSINESS 11 SEP FOR ALL IMAGES - RC11CDDEB680

CEO Simon Wolfson said the outcome was in line with management’s expectations.

“I can’t take responsibility for the analysts’ number, it’s bang in line with where we expected to be,” he told Reuters.

FILE PHOTO: Signage at a branch of Next in London, Britain, September 15, 2016. REUTERS/Toby Melville/File Photo

“We’re seeing far more week by week volatility and consumers being influenced far more by what the weather’s like,” he said.

Britain’s most successful clothing retailer this century in terms of profits, Next has faltered over the last two years due to a shift in spending away from clothing towards holidays and entertainment that it first identified in 2015.

Next maintained its central profit guidance for the full year - a pretax profit of 717 million pounds, down from 790.2 million pounds in 2016-17.

But it narrowed its full-price sales forecast to a range of down 1.75 percent to up 1.25 percent.

Next said comparative sales numbers with last year are much harder in the fourth quarter than they were in the third.

Editing by Kate Holton and Mark Potter

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