The high street retailer reported a 0.2% fall in total sales between 31 January and 2 May 2016 and a -0.9% fall in full price sales over the same period, driven by unseasonably cold temperatures in March and April of this year.
It also cut its sales guidance for the second time in two months, on the back of worries that its underperformance over the past six weeks could be potentially indicative of a “wider slowdown in consumer spending.”
"We believe it is unlikely (but possible) that sales will deteriorate further, and we have seen a significant improvement over the last few days as temperatures have risen...Given this uncertainty, we think it is prudent to widen and lower our full price sales guidance range to -3.5% to +3.5%. The lower end of this range is based on sales for the rest of the year continuing to run at the rate of the last six weeks,” the retailer announced.
Brewin Dolphin equity analyst, Nicla Di Palma remarked that the market reaction to the news reflected the level of negativity at play within the marekt.
Next’s current share price reflects the fact that investors expected to see even worse guidance, she said, adding: “The decline in margins just means the current level isn’t sustainable."
This is the latest bump in the road for Next, following a dramatic slump in share price in March, which saw the fashion retailer go from £66.60 per share to £56.55p per share in the span of one day (March 23rd-24th). From that period forward, the company’s share price did not rise above £56.55 and reached its lowest point (£47.89) this Tuesday.
The company’s “much less weather dependant” Home and furniture division had much better results over the same period, however, with full price sales up by 7%.
Despite its initial poor sales performance, Next insisted its cash flow remains strong and anticipated having £350m of surplus cash after interest, tax, capital expenditure and ordinary dividend deductions.
During the day Next’s share price moderated to around £51.60 or 3.56% higher.