Next warns on challenges to arise as sales fall

Next has warned that this year will be "challenging" as it reported a fall in sales in the run-up to Christmas.

The retailer said full-price sales fell by 0.4% in the 54 days to 24 December, with annual profits now set to be at the low end of expectations.

The firm forecast full-year profits would be £792m, compared with previous guidance of £785m-£825m. 

Next said sales in 2017 could be hit as rising inflation erodes earnings growth and squeezes consumer spending.

Next shares fell by 12% at the start of trading in London.

"The year ahead looks set to be another challenging year; therefore we are preparing the company for tougher times," the company said.

It said the price of clothing could rise "by no more than 5%" following the fall in the value of the pound last year. It added that this would "depress sales revenue by around 0.5%".

As a result, it said it was budgeting for full-price sales growth in the year to January 2018 within the range of a fall of 4.5% and a rise of 1.5%.

If it came in at the mid-point of a fall of 1.5%, that would be "marginally worse" than the current year's performance, it added.

Next is already predicting a fall in profits for next year, saying it expects to make between £680m and £780m.

However, the retailer said it was "well placed to weather a downturn in consumer demand".

The figures for the 54 days to Christmas Eve revealed sales in stores fell by 3.5%, while Next Directory sales rose by 5.1%.