Next PLC (LON:NXT) saw its shares slump 13% as the retailer cut its profit guidance for the current financial year, and also warned on the outlook for the next, as it reported a drop in sales over the key Christmas period.
Next said its central guidance for pretax profit for the full-year to end-January 2017 is now £792mln, down from the £805mln indicated previously
The firm also forecast pretax profit in the range of £680mln-£780mln for full-year 2017-18, below analysts' current average forecast of £784mln.
In early trading, Next was the top FTSE 100 faller, with its shares dropping 659p to 4,111p, blighting other blue chip clothing stores with Marks & Spencer PLC (LON:MKS) and Primark-owner Associated British Foods PLC (LON:ABF) both down around 5%.
In reaction, Cantor Fitzgerald analyst Freddie George chopped his price target for Next shares to 4,600p from 5,200p, but retained a 'hold' rating on the stock.
In a note to clients, he said: "The trading update was disappointing and worse than our forecasts despite sales being up against relatively easy comparatives."
But, the analyst added: "The brand is, in our view, not broken even if it has lost its edginess against some of the mainstream competitors."
Next attempted to cushion the blow for shareholders by proposing a return of surplus cash by way of four quarterly special dividends of 45p each next year.
Christmas sales fall ...
The clothing and homewares retailer said its total full price sales were down 0.4% in the 54 days from Tuesday 1 November to Saturday 24 December, with Next Retail sales falling 3.5% in the period, although its Next Directory online and catalogue sales were up 5.1%.
The group said its sales performance in the fourth quarter improved on the third quarter and was better than the run rate for the full year.
However, Next was expecting sales in the fourth quarter to grow on the previous year, as the comparative numbers in 2015 were poor.
The stores group saw its total full price sales for the year to date fell by -1.1%, with Next Retail sales down 4.3% and Next Directory sales up 3.6%.
Another challenging year ...
In its statement, Next said: “The year ahead looks set to be another challenging year; therefore we are preparing the Company for tougher times and have set our full price sales budget accordingly.”
The firm added: “The fact that sales continued to decline in quarter four, beyond the anniversary of the start of the slowdown in November 2015, means that we expect the cyclical slow-down in spending on clothing and footwear to continue into next year.”
However, Next said it is “well placed to weather a downturn in consumer demand. “
“Our balance sheet remains robust and our net debt is forecast to close the current year at around £850m, this is more than covered by the value of our Directory debtor book which will be approximately £1bn at the end of January 2017,” it concluded.
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