Next shares sunk by more than 6 per cent today as investors winced at news that sales across its 528 shops declined 5.9 per cent in the last three months.
The High Street stalwart, whose boss Lord Simon Wolfson condemned the business rates system that is said to be ‘crippling’ bricks-and-mortar retailers earlier this week, fared much better online.
Full price sales at Next’s online business surged 12.5 per cent in the quarter, offsetting the in-store decay and leaving Next with an overall rise of 2.8 per cent.
Store sales fell 5.9% in the quarter, in line with falling footfall across UK High Streets
The cautious retailer, which had anticipated growth closer to 1 per cent, thanked the ‘prolonged period of exceptionally warm weather’ for the unprecedented splurge on summer clothes and accessories in July.
But it warned that a quieter-than-usual August may lie ahead and held firm on its forecasts for the full year.
‘It is almost certain that some of these sales have been pulled forward from August, so we are maintaining our sales and profit guidance for the year to January 2019,’ the retailer said.
Sales falling in shops but rising online is a familiar pattern for Next, which like all High Street retailers is battling declining footfall.
It has benefited, however, from establishing a strong online presence early on – helped by its once-buoyant catalogue business.
Next still prints and send out its Directory catalogue, but most of the sales have moved online
Across the year-to-date, Next’s online sales are up 15.5 per cent, versus a 5.3 per cent decline at its shops.
Its main High Street rival Marks & Spencer, and other fashion firms like New Look and House of Fraser, are closing large swathes of stores to help ease rising costs as the rise of online shopping. Next, meanwhile, has no plans to radically reduce store space.
The retailer insisted today that its cash flow ‘remains strong’, and has handed over £300m to shareholders since the start of the year through a share buyback programme.
Russ Mould, investment director at AJ Bell, described Next as a ‘notable bright spot’ in the fast-changing retail industry.
He said: ‘Wolfson is justly known for providing cautious guidance and this looks to be reflected in today’s first half trading update from the retailer.
‘Investors seem to be taking this warning to heart, although it is worth noting the company upgraded guidance after the better-than-expected first quarter performance announced in May.’