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Next chief Wolfson says economy stabilising

UPDATED: Next chief executive Simon Wolfson has given the strongest indication yet that the economy is stabilising after the retailer recorded a like-for-like sales fall of just 2.3% for the 14 weeks ended May 2 - well ahead of management estimates that sales would fall between 6% and 9% in the first half.

Wolfson told Drapers: “We’re addressing the situation, and it’s not as bad as people are making out. I’ve been quite vocal about this, retailers are not facing Armageddon. It’s almost impossible to say we’re still in a recession but neither are we in a total recovery. What we are seeing is a stabilising of the economy.”

Next said total retail sales grew 1.1% over the quarter with Next Directory sales also ahead by 1.6%. Combined sales were up 1.2%.

Next said it had readjusted its first half forecasts on the back of the first quarter results and that it now expected sales to be down by between 4% and 7%. It said that it had added £15 million to its internal profit forecasts as a result, equivalent to a 4% upgrade.

However Wolfson said the first quarter figures needed to be “treated with caution” because they had been flattered by a later Easter, warmer weather and fewer people travelling abroad during the Easter holidays because of the weak sterling, although he said that Next’s ranges had also improved.

Next said in a statement: “We expect the second quarter will be weaker than the first as comparative figures are more challenging. Last year the second quarter was much better than the first. We are now forecasting that Next Retail like-for-like sales in the first half will be within the range of -4% to -7% and that Next Directory sales will be broadly flat. These estimates do not factor in any effects of a possible flu pandemic.”

“Generally, we are happy with the positioning and composition of our ranges. Stock levels are in line with our expectations and below last year’s levels. As a result of the better than expected sales to date we have added £15m to our internal profit forecasts. However, these improvements could yet be offset by the effects of pandemic flu, although at this stage it is hard to predict the impact on consumer behaviour.”

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