IRUK 500 Merchandising

Next says move away from discounting is paying off – but half-year sales are still down

Next [IRDX RNXT] said its strategy of reducing discounting across channels had paid off as full-price sales rose in the second quarter of its financial year. However, full-price sales in the first half of the year were down by 1.2%, while total sales, including markdown sales, fell by 2%.

Online, full-price directory sales rose by 3.3% in the first quarter of its year, 11.4% in the second quarter, taking first half growth to 7.4% overall.

In stores, full-price retail sales fell by 8.1% in the first quarter and by 7.4% in the second, taking the overall first-half decline to 7.7%.

In a first-half trading statement out today, Next, a Leading retailer in IRUK Top500 research, said: “During the second quarter June and July sales have been better than expected.  We believe there has been some improvement in our product ranges and our online functionality during this period.  However, we believe most of the increase in full price sales is due to the much warmer weather and, to a lesser degree, lower markdown sales in the end-of-season sale.”

The retailer now expects second half full-price sales to be down by 1.2%, with full-year sales now expected to be in the range of between 3% down and 0.5% up. Pre-tax profits are expected to be down by between 13.9% and 6.4% on last year.

Commenting on the figures, Ben Flint, market analyst at Cityindex.co.uk, said:
“The warm British summer may have increased clothing sales at Next, but it hasn’t brought a great deal of joy to investors. Some could be disappointed that the company’s full-year profit guidance, downgraded slightly in March, has been held steady by the retailer despite all the sunshine.

“Sales were indeed higher-than-expected in June and July, but Next didn’t manage to clear as much stock as hoped during its end-of-season sale, neutralizing the benefit.

“British retailers like Next are evidently still struggling to deal with a spike in inventory costs caused by the dramatic fall in the value of the British pound, which is also weighing on consumer confidence.”

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IRDX: RNXT

Next is a British multinational clothing, footwear and home products retailer. (more…)