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Retailer Next defies British economic gloom, lifts outlook
Global Banking & Finance Review®
Company
By Kate Holton
LONDON (Reuters) -Retailer Next, a bellwether of British consumer spending, expects the country’s high level of employment to protect the economy from a 1990s-style recession and said it was not yet seeing signs of customer financial distress.
Britain is heading for double-digit inflation later this year and food retailers say customers are cutting spending, but Next boss Simon Wolfson said warm weather had encouraged people to spend on clothes in the three months to end July.
That delivered better-than-expected quarterly sales growth of 5%, which is forecast to slow to 1% growth in the second half of the year. The strong second quarter allowed it to lift its annual sales and profit outlook.
Next, a mainstay on the British high street, offers clothing and homewares from about 500 stores and online and is often a reliable gauge of how British consumers are faring.
Wolfson – working for Next since 1991 and CEO since 2001 – said while the gap from wages lagging inflation would hurt, he expected consumers would be encouraged that jobs remain available, boosting confidence, unlike the 1990s when millions were out of work and homes were repossessed.
He said the proportion of customers who were defaulting on credit was also below historic levels.
“Although that doesn’t mean that everything’s rosy, what it does mean is that at the moment, we’re not seeing any signs of consumer distress that might be expected at this point in the cycle,” he told Reuters.
Retailers across Europe are bracing for tougher times ahead, with some still citing pent-up customer demand from the pandemic and others seeing sales start to slide.
Europe’s largest online fashion retailer Zalando said on Thursday it could feel pressures rising on consumers.
Next now expects full-price sales to rise by around 6.2% in the 2022/23 year, compared with an earlier forecast of 5%. It raised its pretax forecast by 10 million pounds, to 860 million pounds ($1.04 billion).
Next also said its stores had outperformed its online business as trends from the pandemic were reversed, and that supply chain disruption and freight costs had started to ease.
Its shares rose by 2%, giving it a market valuation of 8.9 billion pounds.
($1 = 0.8232 pounds)
(Reporting by Kate Holton; Editing by Sachin Ravikumar, Kim Coghill and Edmund Klamann)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured as an annual percentage increase.
Consumer spending refers to the total amount of money spent by households on goods and services. It is a key driver of economic growth and reflects consumer confidence.
A recession is a significant decline in economic activity across the economy that lasts for an extended period, typically visible in GDP, income, employment, manufacturing, and retail sales.
Quarterly sales growth measures the percentage increase in sales revenue from one quarter to the next, indicating a company's performance and market demand over a specific period.
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