Sales dive at Next, with little hope for rest of year

A FURTHER chill blew in from the high street yesterday as fashion group Next revealed a slump in first-quarter sales.

Simon Wolfson, chief executive, said sales had dived a whisker under 9 per cent in the first three months of 2008.

He also warned that full-year sales would probably fall 7 per cent – at the worse end of the 4 to 7 per cent forecast decline the company indicated in March.

Wolfson said the warm weather had helped Next's business pick up in the past 11 days, which meant same-floorspace sales for the year were currently down 7.8 per cent.

"If you look at where we are overall, it is not good but it is not a disaster," he said.

"We are not far from our target range and we still have a chance to make that range, so I don't think people will be rushing to change their forecasts."

City analysts predict profits of £475-505 million this year, down from £537m last time, as shoppers continue to tighten their belts.

Total sales at the group's 340 stores fell 5 per cent in the first quarter, while at its catalogue and online operation, Next Directory, they were down 1 per cent.

Next's shares rose 6 per cent to 1,302p yesterday on relief at the recovery so far in the second quarter. They have crashed from as high as 2,437p a year ago.

Freddie George, retail analyst at Seymour Pierce, said he had upgraded the company's shares to "buy" from "hold", and said he thought the stock's underperformance in recent weeks was overdone.

Luca Solca, an analyst with Bernstein Research, said: "As the worst seems to be on the table, Next looks today marginally more interesting as a 'cyclical play'."

Next blamed its weak Q1 performance on customers facing increases in food and utility bills, and long-term fixed-rate mortgages coming to an end.

Wolfson said these factors would "weigh on consumer spending for the rest of the year".

However, the company added: "We continue to believe that sales in the second quarter will improve significantly as a consequence of last year's unusual weather patterns and we have budgeted on this basis."

Last year's intense flooding in the early summer months devastated the performance of most retailers.

Next said it did not plan any additional price markdowns despite the expected weak demand.

Marks & Spencer chief Sir Stuart Rose recently said it was possible consumer confidence in the high street would not return until 2010, given the challenging macro-economic backcloth.

AUSTIN REED SEES PLENTY OF ROOM TO GROW

AUSTIN Reed is measuring up Scotland for additional stores as the clothing chain continues its expansion since being taken private last year, writes Scott Reid.

The group, which also owns the womenswear brand CC, formerly Country Casuals, plans to open "at least" 30 new stores and concessions throughout the UK and Ireland, taking its estate to about 360 sites.

New stores in Edinburgh's Gyle shopping centre, Newcastle and Liverpool are due to open this summer, while at least nine standalone CC branches and ten concessions are also in the pipeline.

A spokeswoman for the company, which delisted from the London stock market in January last year, said the whole of the UK was in its sights. Currently, the group has 96 Austin Reed stores and concessions in the UK and Ireland, including seven in Scotland, as well as 233 CC outlets, 18 of them north of the Border.

Chief executive Nick Hollingworth said: "Now is an excellent time to be looking at stores. There's a lot of retail space coming on to the market."

Posting its first set of full-year results as a private company, the group said UK and Ireland revenues rose 1.8 per cent to £110 million, while underlying group earnings topped £8.8m, up from £6.7m last time.