Next sees tough year ahead

British clothing retailer Next Plc said trading would be tough in its stores this year with like-for-like sales seen down 4-7 percent, knocking its shares. "Trading conditions in the year ahead will continue to be difficult as increased costs and rising taxes put pressure on our customers," Chairman John Barton said in the results statement on Wednesday.
"It's tough but not dire. Sales are going to be down," Chief Executive Simon Wolfson said in a telephone interview. "In a consumer downturn it's a case of preserving as much as you can of the bottom line".
Next said in January that year profits would be just ahead of market expectations after its Directory catalogue and online business fared better than forecast, while warning that its outlook for the year ahead was "extremely cautious".
Britain's retailers have struggled as indebted shoppers cut back on spending amid higher energy and food bills and a cooling housing market. The company said pretax profit for the year to January was 498.1 million pounds ($1 billion), in line with forecasts, and up from 478.4 million last year.
That compared with a range of 492-502 million pounds that the company forecast in January, and the 495.2 million pounds average of 22 analyst forecasts given to Reuters Estimates. Revenue rose 1.4 percent to 3.3 billion pounds.
Shares in Next fell to a fresh 4-year low of 1,098 pence. They were down 5.5 percent to 1,114p by 1245 GMT, valuing the company at around 2.1 billion pounds. "Whilst the full year results are at the top end of consensus, the uncertain outlook and Next's own warnings of the difficulties ahead lead us to retain our sell stance on the stock," Panmure Gordon analyst Philip Dorgan said in a note.
"We continue to believe that the risk remains on the downside," Dorgan added. Rival Debenhams said on Tuesday that it expected the retail environment to remain tough, and Marks & Spencer posted its worst quarterly performance in two years in January.
"Overall the tone of this statement is in our view unremittingly downbeat and has probably been shaped by deteriorating UK clothing market conditions over the past two months and the unpredictability of the market outlook in the near term," Credit Suisse said in a note.
Asked if the company might not meet forecasts for pretax profit of 474.3 million pounds this year, as predicted by 22 analysts for Reuters Estimates, Wolfson told Reuters: "That's where the market is". Retail like-for-like sales fell 3.2 percent in the year, within the guidance Next gave at the start of the year for a decline of 1-4 percent.