Next adjusts profit forecast

Blaming higher operational costs as it transitions from high street sales to online, Next has cut its earnings forecast by £4 million.

In a trading update it said: “Our central guidance for full year profit is now £723m, 0.6 per cent lower than our previous guidance of £727m.”

According to Next, £2.5 million of the drop in profits has been as a result of the increased operational costs due to online sales. The other £1.5 million is the result of higher sales on seasonal products which have a lower margin than  clothing.

Store sales at the retailer fell by 9.2% while full price online sales grew by 15.2% during the Christmas trading period.

Overall, this meant that full price online sales during the peak season were up 1%. Next said that sales were strong in the three weeks to Christmas but it had a disappointing November.

For its full year to January 2019, Next estimates that total full price sales will be up 3.2 per cent on last year, while pre-tax profit, at £723m will be 0.4 per cent down.

And for the coming year it forecast that store sales would fall 8.5 per cent while online sales would rise 11 per cent. However, it warned that forecasts made now carry a high degree of uncertainty.

“This year uncertainty around the performance of the UK economy after Brexit makes forecasting particularly difficult. We have not factored into our sales estimates the potential benefits of a smooth transition or the downsides of a disorderly Brexit.”

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