Next Lowers Profit Forecast and Warns of Difficult Year Ahead

LONDON, United Kingdom — UK clothing retailer Next Plc cut its annual profit forecast and predicted a difficult year ahead, providing a blow to the industry at the start of the Christmas reporting season.

Pretax profit for the year ending this month will be about £792 million ($971 million), the Leicester, England-based company said Wednesday, below a previous projection of about £805 million. Next also forecast pretax profit for the following fiscal year in a range of £680 million to £780 million, below estimates of about £784 million.

“The year ahead looks set to be another challenging year,” the retailer said in a statement. “We are preparing the company for tougher times.”

Next’s caution is likely to be heeded by investors after chief executive officer Simon Wolfson last year correctly predicted that Next was facing its toughest year since 2008. In addition to weaker growth in its online business, a slump in sterling is pushing up sourcing costs at a time when demand could be vulnerable to a Brexit-induced squeeze on spending power.

“We expect the cyclical slowdown in spending on clothing and footwear to continue into next year,” Next said in the statement.

The retailer’s Christmas sales were below analysts’ estimates. Full-priced sales under the Next brand fell 0.4 percent in the 54 days ended Dec. 24, compared with the median estimate of 18 analysts for a 2.2 percent increase.

By Sam Chambers; editors: Matthew Boyle, Paul Jarvis and Phil Serafino.