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Next warns of tough year ahead and cuts sales forecast

Lauretta Roberts
24 March 2016

High street giant Next has cut its sales forecast for 2016 and has warned trading this year could be the toughest it has seen since 2008. Chief executive Lord Wolfson said consumer spending "does not look as benign as it was at this time last year" and while tough conditions may reverse as the year progresses, it was prudent to adjust its financial projections.

Wolfson's comments came as Next revealed its results for the year ending 31 January 2016. Underlying pretax profit for the year rose 5% to £821.3m as full-price Next-branded clothing sales increased 3.9%. The business has now said that it expected to deliver profits of £784m to £858m in the next financial year, which would represent a 4.5% fall at the low end of the range, or a 4.5% increase at the top end.

Wolfson also predicted sales of full-price Next-branded product could fall by 1% or, at best, rise by 4% this year with a mid-point of 1.5%. The forecast represents a sharp reduction from January, when Next said it expected sales to rise by between 1% and 6% in the coming financial year.

The CEO attributed his gloomy prediction to stagnant real growth in wages, even though employment levels in the country are at a record high.

Historically Next has been a robust performer even when others were experiencing tough trading, so this news spooked the City and its shares dropped 6.6% to £62.15 on the back of the announcement.

 

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