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Persimmon - The housing plot thicken

Next’s third quarter trading statement confirms that full price NEXT sales are expected to come in at the lower end of previous guidance this year. However, with cost savings progressing ahead of schedule, the shares moved slightly higher on the news.

In Q3, the effect of a bigger than normal sale season and new sales space opening up helped total sales for the quarter marginally rise. However, full price sale are 3.5% down on last year.

George Salmon, Equity Analyst at Hargreaves Lansdown:

"2016 is proving something of an annus horribilis for Next. While a tough quarter was expected, the group has been forced to trim sales expectations for the year.

Some of the contributing factors, such as periods of unseasonal weather, can impact any retailer at any time, however Next has some bigger issues to deal with.

CEO Lord Wolfson is worried that the clothing sector could be seeing an underlying fall in demand, while the group has just woken up to the realisation that competitors have caught up with its Directory offering. Directory sales were again worse than expected this quarter, and the heady days of double digit growth are just a distant memory for the group now.

With the weaker pound meaning imported textiles are now more expensive, Next will need to make some tough choices on how it tackles this extra cost."


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