Next shares nosedive after it warns of worst year since crisis

Next shares are leading the FTSE 100 lower on Thursday, slumping by almost 15 per cent in the final two hours of trading after it warned it was facing its worst trading year since the financial crisis.

Writing in the company's full-year results, chairman John Barton said the retailer was facing "a challenging year with much uncertainty in the global economy".

Chief executive Lord Wolfson added there were signs that higher levels of disposable income were causing a cyclical shift away from clothing and "into areas that suffered the most during the credit crunch".Citing official figures on public spending, he said it "can clearly be seen that growth in experience related expenditure, such as eating out, travel and recreation, was much stronger" than in the clothing sector.The results revealed that sales growth was modest for the year to 23 January. Sky News notes underlying profits rose five per cent, to £821m, on the back of a three per cent rise in sales to £4.15bn.Looking forward to next year, Next lowered guidance for sales from growth of between one and six per cent to between negative one per cent and four per cent. It said profits could actually fall by as much as 4.5 per cent.

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The company also said that growth in sales in its online arm, up 7.7 per cent last year, is slowing as competitors make ground and that overseas sales would slow to a still-impressive 25 per cent as it has already opened into all of its largest target territories, including China.

Next disappoints City with pre-Christmas sales

05 January

Next has become the first UK high street retailer to report sales figures for the critical pre-Christmas period – and they have not been warmly received by investors.

The company branded as "disappointing" a 0.4 per cent increase in overall sales between 26 October and 24 December, which it said was in large part due to the unseasonably mild weather in November and December. It even published a graphic (see below) showing the correlation between average temperature and sales in the second half of last year.

Analysts had expected a rise of around four per cent, says The Guardian. Underneath the headline figure was a 0.5 per cent drop in sales in stores, which was offset by a two per cent rise in sales through its catalogue and online businesses. The 0.4 per cent rise includes sales at stores open less than a year, meaning the like-for-like sales figure preferred by analysts could have been negative.

The company's shares are leading the fallers on the FTSE-100 this afternoon, dropping 5.1 per cent to 6,827.5p.

That sales were still marginally positive overall was in part a reflection of Next's refusal to follow rivals and discount early, which helped to hold margins higher. Marks and Spencer adopted a similar strategy, but it is expected to report even more dismal figures later this week.

Having recorded a six per cent rise in profits in its clothing division in the six months to September, analysts reckon it is likely to report that sales fell two per cent in the lead up to Christmas compared to the same period in 2014, says the Yorkshire Post. Some have even predicted a fall of more than five per cent.

FastFT notes that the retail sector in general is likely to have struggled in the mild weather, which exacerbated the pressure on many traditional high-street stores, which are continuing to lose market share to cheaper online rivals. Before Christmas Bonnmarche and Game were among those to warn they would likely undershoot previous profit guidance.