Jan 4, 2017

Next's gloomy 2017 forecast drags down fashion retail shares

Next's share price slumped by 10% after the fashion and homewares retailer warned of a tough year ahead amid rising inflation and shoppers switching away from buying clothing.


Chief executive Lord Wolfson, a prominent Vote Leave campaigner, said: "There is a continuation of what we have been talking about for nine months to a year, a cyclical shift out of clothing. Clothing has had a good run. It had a soft landing during the credit crunch when things like car sales were hit harder but now there is a shift away from clothing to more experiential based spending like eating out, holidays and visitor attractions."

He said there had been a big drop in sales of Next gift vouchers in the run-up to Christmas, suggesting clothing had become a less popular present, and that the trend away from fashion would continue into 2017. Wolfson said that weather was part of the issue, as Next had enjoyed strong sales during a cold snap in November. But over the three-month period sales across the board, including homewares, were disappointing, not just coats, hats and boots which are more reliant on chilly conditions.
Next forecast that sales might be further depressed this year by a squeeze on spending as inflation eroded real earnings growth. It also warned that the devaluation of the pound following the Brexit vote would push up the price of clothing staples it sells all year round, such as T-shirts, by up to 5%, depressing sales revenue by about 0.5%.

by Julia Kollewe