Next held back by slowing online sales growth

Next, Britain’s No.2 clothing retailer, reported a slowdown in sales growth at its online and catalogue business, whose stellar performance has helped it to avoid the worst of a downturn in consumer spending.

Shares in the firm, up 40 per cent over the last year, slipped 1.9 per cent yesterday as the slower growth at the Next Directory business offset news overall sales had recovered from a slow start to the third quarter, allowing the firm to edge up the bottom end of guidance for the full year.

Many British retailers are finding the going tough as consumers hold back spending in the face of inflation, meagre wage increases, and government austerity measures.

British retail sales picked up more than forecast in October, a survey showed on Tuesday. However, one published yesterday said UK consumer confidence fell to its lowest in six months in October, highlighting the fragility of Britain’s recovery from recession.

Next has generally defied the gloom, helped by its strong online offer, a constant stream of new store openings and diversification into homewares and overseas markets.

Third-quarter retail sales rose 1.1 per cent, having been up 0.2 per cent in the first half, while Next Directory sales rose 5.6 per cent, having increased 13.3 per cent in the first half.

“Given that Directory had seen double-digit sales growth for six consecutive quarters, we expect this to slightly disappoint,” said Investec analyst Bethany Hocking.

Next attributed the Directory slowdown to the annualisation of delivery improvements made last year and chief executive Simon Wolfson said investors should not by alarmed.

“The view we’ve always taken is that what counts is the overall number, and although Directory is worse than in Q2, retail has actually got better,” he said.

Next, which trades from over 500 stores in the UK and Ireland and 200 stores in over 30 countries overseas, said its total sales rose 2.7 per cent in the 13 weeks to October 27, taking year-to-date growth to 3.8 per cent.

That compares with first half growth of 4.5 per cent and previous guidance for full-year growth of two to 4.5 per cent.

With Next expecting its fourth quarter sales to increase in line with the year-to-date rise, it narrowed its full-year sales guidance to growth of three to 4.5 per cent.

Last month Next had said sales in August and early September had been disappointing.

Wolfson blamed the slow start to the quarter on unhelpful weather and the distraction of the Olympics rather than any further deterioration in the lot of the UK consumer.


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