Next PLC yesterday issued its second profit warning this year in the light of soaring inflation in the UK and a devaluation of the British pound undermining consumer confidence.
The British clothing and housewares chain said that profit for the year would total ￡840 million (US$911 million), compared with previous guidance of ￡860 million.
Full-price sales in the second half are expected to drop 1.5 percent rather than climb 1 percent.
Next said that sales last month “slowed significantly” and pressure from the UK’s highest inflation in four decades would rise in the coming months into next year, aggravated by the recent slump in the value of the pound.
Next stock fell 7 percent in morning trading in London.
The changing outlook demonstrates how hard it is for retailers to predict performance as the cost-of-living crisis hits spending on everything from food to household bills.
The retailer, seen as a bellwether for the health of the UK’s main streets, cut guidance earlier this year before raising its outlook last month.
“With so many variables at play, predicting near-term sales trends is unusually difficult,” chief executive officer Simon Wolfson wrote in the earnings update. “All the more so with recent government stimulus measures yet to take full effect.”
All retailers are battling against weak consumer demand in the UK.
Prices in British shops hit a fresh record-high this month, with brands increasingly having to pass costs on to consumers.
Online fast-fashion retailer Boohoo Group PLC on Wednesday cut its profit guidance as soaring bills stop consumers from spending on clothes and shoes.
Hennes & Mauritz AB yesterday said that operating profit dropped below analysts’ estimates in the three months through last month after the retailer’s exit from Russia and higher costs caused earnings to slump.
The predicament for British retailers is worsened by the fall in the pound, which is on track for its worst month since the UK voted to leave the EU on concern that British Prime Minister Liz Truss’ new fiscal stimulus measures could fuel inflation and the nation’s ballooning debt.
“Going forward, the devaluation of the pound looks set to prolong inflation, even once factory gate prices ease,” Wolfson said. “It looks like we may be set to have two cost of living crises: this year, a supply-side led squeeze, next year a currency-led price hike as devaluation takes effect.”
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