Britain's Next flags weaker collections in cautious outlook

British clothing retailer Next cut its sales guidance for 2015-16, highlighting weaker collections after reporting a 12.5 percent rise in annual profit and a dividend increase.

Next, which trades from over 500 stores in Britain and Ireland and almost 200 stores overseas as well as the Directory catalogue and internet business, on Thursday forecast sales growth of 1.5-5.5 percent in the year to end Jan. 2016 compared to previous guidance of 2.5-7.5 percent.

Shares in the firm, up 19 percent over the last year, were down 3.4 percent at 7,360 pence at 0946 GMT, valuing the business at 11.1 billion pounds ($16.5 billion), second only to supermarket Tesco in Britain's retail sector.

Next forecast a pretax profit of 785-835 million pounds for the current year, a growth of 0.4-6.7 percent.

"Although the (UK) consumer economy looks benign, we remain very cautious in our sales budgets," said CEO Simon Wolfson.

"Whilst we are happy with most of our current product ranges, we recognise that some collections are not as strong as they were at this point last year."
Wolfson explained that the 2014-15 year was exceptional in that the firm's buyers had got "pretty much every range right".

"This year is a more normal year, we don't think we've got everything right," he told Reuters.

Wolfson also highlighted that Next faces very tough comparative numbers during the spring and summer seasons because last year's sales were helped by unusually warm weather.

However, he noted there was potential upside in the second half as last year's comparative performance weakens.

Wolfson, a member of Britain's upper house of parliament and a prominent supporter of the ruling Conservative Party, said low inflation, increasing real wages, healthy credit markets and strong employment all painted a positive economic picture.

However, he said there was little evidence consumers were spending any increases in disposable income on clothing.

"It doesn't seem to be coming into clothing but we'll need to see everybody else's results before we know that for sure," he said.

Marks & Spencer, Britain's biggest clothing retailer, updates on trading on April 2.

"If as good a business as Next is struggling to grow that much in the current retail climate then it will be much harder for the likes of M&S," said independent retail analyst Nick Bubb.

Next has outperformed rivals for a decade due to a strong online offer, new store openings and diversification into new product areas, such as homewares, and overseas.

It made an underlying profit before tax of 782 million pounds in the year to end-Jan. 2015, in line with company guidance and up from 695 million pounds in the 2013-14 year.

Underlying earnings per share (EPS) rose 15 percent to 420 pence, the dividend increased 16 percent to 150 pence a share and the firm reaffirmed a plan to return 360 million pounds of surplus cash to shareholders as special dividends or share buybacks.

Though the firm has seen some significant recent management departures, Wolfson said he remained committed to the business.

"I'm only 47 ... I have no intention of doing anything else."

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