Next Warns Of 'Toughest Year Since 2008' As Profits Rise To £821m

Next Warns Of 'Toughest Year Since 2008' As Profits Rise To £821m
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High street giant Next sent out a warning shot from the retail sector as it cautioned over profits for the year ahead and said 2016 could be the "toughest" since the financial crisis.

The group - seen as a retail bellwether - posted a 5% rise in underlying pre-tax profits to £821.3 million for the year to the end of January, having already warned over results in January after a difficult Christmas due to unusually warm weather.

Next said it was bracing itself for a slowdown in the global economy and for profits to fall by up to 4.5% in a year that "may well be the toughest we have faced since 2008".

Next said that, as well as the wider economic woes, it also fears consumers are shifting spending away from clothing towards other areas, such as eating out and travel.

It is forecasting profits for the year to the end of January 2017 of between £784 million and £858 million - ranging from a fall of 4.5% to growth of 4.5%.

The group's predictions for full-price Next brand sales - a key measure of the company's performance - range from a fall of 1% to growth of 4%.

Next said it was preparing for a worst-case scenario, which could be skewed by weather conditions, but said "at this stage we think it is best to prepare ourselves for what could be a difficult year".

Lord Wolfson, chief executive of Next, said: "It looks as though we may be set for a challenging year, with economic and cyclical factors potentially working against us."

The group's gloomy comments will spark concerns for UK growth, which has been propped up by consumer spending and a thriving services sector in recent years.

Its warning also comes despite what the group described as a "solid" year, with Next Brand sales up by 3.7%.

Sales across its 540 stores rose 1.1% as growth was held back by a disappointing Christmas performance, when sales dropped 0.5%.

It posted growth of 7.7% across its Next Directory online and catalogue arm, but this marked a sharp slowdown on the 12.1% surge seen the previous year as the festive trading woes were compounded by stock shortages and tougher online competition.