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City expects flat trading from 'chastened' Next

The City is anticipating flat trading at best from Next's retail arm when it reveals full-year results on Thursday, as sources say it continues to lose market share.

The retailer expects group pre-tax profit to be in line with its forecast of between £463 million and £473m, up by about 3% on last year's figure of £449.1m.

One source said that in the latest market share data for the year to February, Next's share of womenswear was down by low to mid single digits, although it had made some gains in volume share.

Seymour Pierce retail analyst Richard Ratner said he did not expect trading conditions to have improved much since Next's downbeat Christmas trading statement in January, which revealed a 6.9% drop in same-store sales. He warned: "Current retail trading on a like-for-like basis is still well in reverse."

He added that Next's like-for-like figures were generally 2.5% to 3% worse than stated because the group did not include sales cannibalisation from shops affected by larger Next stores opening nearby.

Pali International analyst Nick Bubb was more bullish about recent trading. "The weather has been more helpful than last year. Next's chief executive Simon Wolfson can point to a good start to the year," he said.

Wolfson impressed the City in January when he candidly admitted Next's failings in ranging and lack of fashionability. Bubb said: "He's always been pretty cocksure, but was a bit more chastened. He seems to recognise that it needs to move faster on store design."

Bubb added that he expected to see a big focus on the new format that Next plans to roll out in Sheffield's Meadowhall shopping centre, as well as improvements to product.

Ratner agreed that focus on product was paramount to drive ailing sales, particularly as the chain had upped its marketing spend and is embarking on its first major TV ad campaign in 12 years. "To do TV ads you have to ensure you have the right merchandise first," he said. "So far, what I've seen doesn't look that exciting."

Drapers revealed earlier this month that Next had begun trialling the TV ads in Scotland (Drapers, March 3).

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