Next chief executive Lord Simon Wolfson has said the UK is entering into an economic slowdown and clothing retailers will be hit hard as shoppers spend their cash on entertainment rather than fashion.
Lord Simon Wolfson
The firm reported total sales rose by 3% to £4.1bn for the year to January 2016, while profit before tax increased 5% to £821.3m. However Next revised down its expected growth for 2016 to minus 1% to plus 4%. Previously it had expected growth of between 1% and 6%.
“We will see a slow down over the next year. Clothing will fall much faster than other sectors as there will be an uneven flow into different parts of the market,” said Wolfson.
“There are two parts at play- an external economic slowdown and a change in how people want to spend their money, they want to spend it on travel and eating out and entertainment.”
However he added that he was “not forecasting a recession”.
Wolfson said the business would try to capitalise on growth in the events and entertainment market by selling more dresses and occasionwear.
Like many other high street retailer’s Wolfson admitted the warm weather over the autumn season hit trade but said the lost sales could not be made up by a cold spring.
“There’s not a lot you can do about the weather. People won’t buy t-shirts or shorts in February no matter how warm it is and they won’t buy coats in March as they won’t invest in something they will get limited use out of. When the weather is against you, you just have to take it.”
He added that Next had added more transitional pieces to combat the colder weather in January and February but those sales “would not make up those lost” in the autumn.
Next’s third party branded business Label, added 20 major new brands in the year to January and Wolfson said there was a “significant opportunity” to grow that part of the business further.
The retailer will add seven yet to be named brands to the offer in 2016. He also said he would shift more to a concession basis rather than a wholesale model this year.