Next cuts profit outlook after warm weather delayed winter shopping
Next plc has downgraded its annual profit outlook after exceptionally warm weather delayed consumers’ autumn/winter shopping, the British multinational clothing, footwear and home products retailer announced on Tuesday.
As its third-quarter sales came in at about 50% below expectations, the company forecasts a full-year profit of between £750 million and £790 million. Even so, this would still represent a rise of 8% to 14% compared to last year. In September, the top-of-range guidance had been £850 million.
One month ago, Next warned that the exceptionally warm weather was hurting sales of autumn/winter clothing, it added that if this continued its profit forecasts might be cut.
Although August’s weather was relatively cool, which started pushing up third-quarter figures, September’s and October’s unseasonably warm weather more than offset that gain.
This year, Next says it has returned £361 million of excess cash to shareholders, £138 million through share buybacks and £223 million through special dividends.
Its debt for the end of the financial year is expected to be virtually the same as last year. No further special dividends will be paid in this financial year, the company added.
In its Interim Management Statement, Next wrote:
“We have capacity to make further buybacks this year and may do so if we believe it to be in the interests of our shareholders. Our price limit for buybacks next year will be issued at the end of December, with our Christmas Trading Statement, when we will have our first forecast for the year to January 2016. In the meantime, we will not purchase share above the maximum price we have paid to date, which is £64.25.”
Many UK clothing stores have reported weaker sales during the autumn, due to the warm weather. According to the Office for National Statistics, retail sales declined in September by 0.3% compared to August, the first drop in four months. September clothing sales fell by 7.8%.
The weather is likely to have dampened Marks & Spencer sales too, which announces its interim results next week. It is under intense pressure to post improved figures, especially in clothing.
Headquartered in Enderby, England, Next plc has about 700 stores, including 597 in the United Kingdom and Ireland, and approximately 200 in the rest of Europe, the Middle East and Asia. The company employs more than 54,000 workers worldwide.