Next blames warm weather and online rivals as it posts ‘disappointing’ festive sales

Next has posted a surprisingly ‘disappointing’ sales performance in the run-up to Christmas, with sales at its high street stores falling 0.5% for the period between 26 October and 24 December.

Although its Next Directory business, which includes online and catalogue sales, posted a 2% increase in sales, the high street retailer admitted that it had still disappointed having fallen from 10% growth the year before.

It said in a statement: “We believe that Next Directory’s disappointing sales were compounded by poor stock availability from October onwards. In addition, the online competitive environment is getting tougher as industry-wide service propositions catch up with the Next Directory.

“We believe that the overall disappointing performance in the fourth quarter was mainly down to the unusually warm weather in November and December, and the impact on winter clothing sales.”

Total sales for the period were up just 0.4% year-on-year, with 1.5% coming from new space. That performance is in sharp contrast to 2014, where the FTSE 100 retail brand saw sales rise 3% year-on-year between October 28 and December 24.

For the full year to January 2, meanwhile, Next’s total sales were up 3.7% on last year, slightly below an earlier guidance of between 4% and 6% growth. And cost and stock control means profits will now remain in the guided range of between £810m and £845m for the year.

Stifel’s retail analyst James Collins says Next should now be wary of the threat of online rivals.

Over Christmas rivals such as Amazon and Argos have extended the deadline for next-day deliver orders while the widespread roll-out of click and collect and services such as Amazon Prime have made the space more competitive.

Collins explained: “Next’s Q4 is disappointing, even in the light of poor weather. The weakness of directory stands out relative to recent trends, with growth slowing to 2% from 10%.

“While management is probably typically too self-critical in highlighting poor stock availability as a factor in this, we should heed its warning that online competition is building as others match its service proposition.”

Taking positives

However, despite the surprise fall in sales, James McGregor of Retail Remedy says there are silver linings for Next.

“Playing down Black Friday and not being drawn into the frenzy despite the lure of footfall, helped Next deliver another quarter of solid trading,” he said.

“Although Next’s results are not as strong as we have previously witnessed, they are well ahead of the curve, and notably ahead of what we expect Marks and Spencer to announce later this week. Marks and Spencer must wish it had a fraction of the general merchandise growth Next are delivering.”

Today’s trading statement is the first look at retailer’s Christmas trading, with John Lewis and M&S also reporting trading figures over the next two days.

Retailers are expected to have had a tough time over the festive period, with research from Ipsos suggesting that high street visits fell 1.8% year-on-year in the week before Christmas and that Brits left their festive shopping to the latest stage since 1998.

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