Next sees ‘challenging year’ ahead

Retailer Next has forecast that 2016 will be a “challenging year” for its business, “with much uncertainty in the global economy”.

The prediction came as the High Street chain unveiled its annual results for the year to 30 January, showing a modest rise in profits.

Pre-tax profit for the 12 months came in at £836.1m, up from £782.2m a year earlier.

Shares in Next fell nearly 10% in early trading in London.

Next said the year ahead “may well be the toughest we have faced since 2008”.

The company, which has more than 500 stores, also downgraded its sales forecast for the 2016-17 financial year.

Previously it had expected growth of between 1% and 6%, but it said it now expected it to fall within a range of minus 1% to plus 4%.

Next said it believed there might be a “cyclical move away from spending on clothing, back into areas that suffered the most during the credit crunch”.

It added that according to the latest figures available for consumer spending, “it can clearly be seen that growth in experience-related expenditure, such as eating out, travel and recreation, was much stronger” than in the clothing sector.

Next clothingImage copyrightNext

Wrong escalator

The retailer said its Next Directory online division had seen slowing growth.

“Partly this is as a result of competitors catching up with our delivery and warehousing capabilities; partly as a result of changes in the ways customers are shopping online,” the firm’s statement added.

It said its priorities included upgrading the online business while developing and expanding its UK retail store network.

“In many ways, we have more to do than ever before with complex challenges to our working practices across product, marketing and systems,” Next said.

“It may well feel like walking up the down escalator, with a great deal of effort required to stand still.

“It will not be the first time we have felt this way, and our experience is that the effort put into improving the business in tough times can pay handsome rewards when conditions improve.”

Next said it expected international online sales to grow by 25% in the coming year, to about £205m.

It said this rate of growth was “significantly lower” than last year, because it had now opened in all its target territories, including China.

“In addition, two of our largest markets, Russia and Ukraine, have both suffered significant currency devaluations,” the firm said.

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