UK retailer Next sees sales slip as demand wanes

Sales at British fashion retailer Next Plc have slipped in recent weeks mainly due to waning UK consumer demand, the firm said last week as it reported full-year profits at the top of forecasts.

Next, which sells mid-price fashion and homewares through its high street stores and its catalogue business, said it had been expecting the slowdown and shoppers' appetite had not drastically fallen.

"We're not overly worried about this," Chief Executive Simon Wolfson told Reuters in a telephone interview. "Everyone always knew that at some point there was going to be an easing in consumer demand... it's not like it's fallen off a cliff."

British consumers are tightening their purse strings in an election year amid concerns about falling house prices and rising interest rates.

Analysts said the retailer had performed reasonably well in a gloomy post-Christmas high street and shares slipped just 0.8 per cent lower to 1566 pence in morning trade.

Next's comments on easing consumer demand echo the recent experience of other mid-market retailers.

Department store chain House of Fraser Plc last week said sales had fallen during the year so far and blamed a slowdown in the housing market for poor trade in homewares.

Retail entrepreneur Philip Green was also downbeat about the UK's mid-priced retail sector earlier this month.

Next stood by its decision to aggressively expand despite the tough trading conditions. It plans to add at least 800,000 square feet in new retail space this year, ahead of analysts' forecasts.

"That's brave, it's a confident sign from the company," said Richard Ratner, retail analyst at Seymour Pierce.

CEO Wolfson said increased selling space was one of its weapons to fight waning shopper demand. He said a difficult market should not affect that strategy.

"It's either worth taking or you should never take it," he told Reuters.

Next said group profit before tax was up 18 per cent to £423 million for the year ended January 2005, at the top end of trimmed forecasts it announced in January.

It said same-store sales were down 3.5 per cent during the seven weeks to March 20 across 333 stores.

It said like-for-like sales would have been down 0.9 per cent in the period if it hadn't opened any new stores over the past year.

On a more positive note, Next Directory catalogue sales were up 10.4 per cent during the period.

The store chain trimmed its full-year profit forecast in January by five million pounds to a range of £415 million to £425 million blaming a slower than expected post-Christmas stock clearance.