October 30, 2019 / 7:23 AM / a month ago

Britain's Next sees October sales recovery

LONDON (Reuters) - British clothing retailer Next (NXT.L) said sales picked up in October after a poor start to autumn trading, though it cautioned it did not expect growth for the rest of the year to be as strong as this month’s.

FILE PHOTO: Shoppers walk past a Next store on Oxford Street in London, Britain December 17, 2018. REUTERS/Simon Dawson/File Photo

Shares in Next were down 3% at 0908 GMT on Wednesday on the outlook, paring gains for the year so far to 67%. The stock hit a 52-week high on Oct. 17.

The group, which trades from about 500 stores in the UK and Ireland, about 200 stores in 40 countries overseas and its Directory online business, maintained its profit and sales guidance for the full 2019-20 year.

It said full price sales including interest income rose 2.0% in its third quarter to Oct. 26, slightly ahead of a forecast given in September.

Last month Next had reported a “disappointing” start to autumn trading, attributing it to unusually warm weather in parts of Britain rather than shoppers holding back on buying new clothes due to uncertainty over Brexit.

The group said it believed that strong sales in July pulled forward sales from August. It said that while sales in September were adversely affected by the warm weather, it saw a significant improvement in October, with sales up 5% year-on-year, when temperatures fell.

“We believe the improved sales growth in October recouped some of the lost sales in September and we do not expect sales growth for the rest of the year to be as strong as October,” it added.

STRUCTURAL SHIFT

Next’s third-quarter outcome continued to illustrate the clothing industry’s structural shift from physical stores to online. While sales in Next’s stores were down 6.3%, online sales were up 9.7%.

Next says its stores will remain profitable even if they become less productive.

For 2019-20 Next foresees full-price sales up 3.6% and pretax profit of £725 million, a 0.3% rise on the 2018-19 outcome, with earnings per share growth of 5.2%, reflecting share buybacks.

There was no commentary in Next’s update on the anticipated impact on Christmas trade of Brexit being delayed to Jan. 31 2020 and a national election being held on Dec. 12.

Analysts at Peel Hunt said a Dec. 12 election date is not a bad one for the industry.

“Black Friday (Nov. 29) may be slightly affected by pre-match nerves, but a clear (election) outcome may be enough to give the sector a fillip into Christmas and the key big ticket selling period,” they said.

Next CEO Simon Wolfson, a prominent Conservative “Leave” supporter who sits in the upper house of Britain’s parliament, has said Brexit will only materially affect consumer spending in the event that it triggers inflationary pressure on prices or logistical problems at British ports. Next does not expect its own prices to rise.

Reporting by James Davey; editing by Sarah Young and Louise Heavens

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