Next admits “challenging year” after fall in profits

Profits at Next (LON: NXT) fell eight percent after the fashion retailer described 2017 as “the most challenging year we have faced for 25 years”.

2017 marked the third consecutive year that Next has seen a fall in profits, which dropped to dropped to £726.1 million in the 12 months to January.

Next said that online sales were positive, increasing by 11.2 percent. In contrast, sales in-store fell by 0.5 percent to £4.1 billion.

Next’s chief executive, Lord Wolfson, said that the decline in sales has “also prompted us to take a fresh look at almost everything we do” including the structure of the shop portfolio and “in-store experience”.

Kate Hardcastle, from consultancy Insight with Passion, said that mid-priced retailers were in a turbulent position.

“The middle market is suffering and there isn’t a way back home,” she said.

“I think retail generally in this market place has been quite lazy. As soon as consumers had an alternative option that are perhaps are a better price, better product or faster moving product, I think they’ve taken it.

“So you’ve seen the rise of Primark on the discount side, Asos and Zara on the more fashion-orientated side and a consumer very much influenced by Instagram and social media.

“It’s just too much of a turnaround, too much of a challenge for these quite heavyweight retailers who have expected to trade they always have.,” she added.

Profits for Next are expected to fall again in the 2018/19 financial year.

“Next has given itself a mountain to climb over the coming year and it remains to be seen whether the improvements are achievable,” said Wolfson.

The decline in Next’s profits comes at a troubling time for many high street retailers. Just this week, Moss Bros (LON: MOSB) issued a profit warning and Ted Baker shares tumbled 13 percent after the retailer warned of a “tough year”.