The latest chapter in the growing tale of woe that is UK retailing tells how Next shares lost 6% as investors reacted to disappointing results.
This echoes the Sainsbury's experience earlier this week. As reported earlier, total sales at Next fell by 2.5% in the first three months of the year and the top end of its profit forecast has been cut to £740m from £780m.
Shift to online from physical
Reflecting the trend to online purchasing away from the high street, store sales nosedived by just over 8% but Directory sales were up 3.3% for the 13 weeks to 29 April. While Directory formally includes the traditional catalogue business, today it is overwhelmingly online trading, says Next, whose origins as the late and unlamented gentlemen's clothes high street retailer Hepworths are probably unknown to most of today's e-shoppers.
Next's undisputed dominance in its niche is very much a thing of the past, says Jordan Hiscott, chief trader at Ayondo markets. “Back in 2010, shortly after the global credit crisis, the firm regularly outperformed its industry peers, thanks to its strong presence on high streets and in out of town stores, combined with an efficient online offering.
“Fast forward to today and the story couldn’t be more different, with the share price having fallen 49% from its 2015 high of 8175p to 4169p today. Unfortunately for the brand, there is a negative pattern not only to the share price but also the sales performance, beginning with a profit warning at the start of the year and culminating with the company trimming its own range forecast today, now capped at £740m.
Make no mistake
“Make no mistake, the consumer environment across the sector is challenging at the moment. I don’t see this changing any time soon, with the effects of an unpredictable Brexit, another UK election and low wage growth all potentially weighing heavily on the sector.”