Although clothing retailer Next has managed to forge ahead of key rival Marks & Spencer for the first time in history, its most recent sales report has failed to live up to expectations.
The unseasonably warm weather during September has seen consumers react indifferently to its autumn/winter collection, leaving executives at the sigh street chain concerned that this could have an impact upon its full year results.
Due to September’s unimpressive performance, sale growth in the third quarter to date fell to just 6 per cent, significantly lower than analysts’ expectations of 10 per cent.
The contents of the unscheduled sales update echoed sentiments from other retailers including John Lewis, Marks & Spencer and House of Fraser, all of whom noted a distinct downturn in sales during September when compared to the results of recent months.
In a statement, Next warned that it may have to adjust its full year profit forecast should the effects of the Indian summer continue into October.
It said; “Cooler weather in August resulted in several very strong weeks: however, warmer weather in the more important month of September has had the reverse effect.
“At present our profit forecast for the full year remains within our previous guidance given on 29 July and reiterated on 11 September, and our experience suggests that some lost sales are regained when the weather turns.
“However, if this unusually warm weather continues for the full duration of October then we are likely to lower our full year profit guidance range of £775 million to £815 million.”
This September has been one of the warmest on record and has taken its toll on the winter clothing lines released by a large number of high street retailers at the beginning of the month.
In order to combat the resulting drop in sales, many are now beginning to offer early season promotions and discounts – something which could prove problematic to the bottom line should the warm spell continue for a few more weeks.
Fortunately for Next, its strong performance in August has shielded it from the worst effects of the Indian summer; something which unfortunately cannot be said for Marks & Spencer. It saw a 0.6 per cent drop in market share during August according to figures from Kantar Worldpanel, with many of its customers defecting to Next.
Retail analyst Nick Bubb was quick to state that, although negative, Next’s trading update should not worry the clothing chain greatly.
He said; “Mighty Next has, out of the blue, warned today that because of ‘the recent spell of unseasonably warm weather’ sales are only running at plus 6 per cent in Q3 to date.
“Next are probably being unnecessarily cautious, ahead of investor meetings this week, but the market is unlikely to take any chances.”
Although consumers may be enjoying the autumn heatwave, it is safe to say that Next, Marks & Spencer and Debenhams – among others – will breathe a sigh of relief when cooler weather finally arrives.
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