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Next cuts outlook after warm weather hits Q3 sales growth

UK fashion retailer Next suffered in Q3 as warm weather deterred consumers from buying winter ranges, crimping its sales growth to around half of its original expectations and prompting the company to revise its guidance as a result. Sales in the period ended October 25 grew 5.4%, well below its initial expectations for a 10% hike. At Next Retail sales rose by 2.4% in Q3, a slowdown on the year-to-date pace of 5.8%, while Next Directory sales increased by 9.7%, again slower than year-to-date gains of 13.7%.

Out of the total 5.4% sales gain – which compares to a higher year-to-date figure of 8.8% – Next said that sales from new space accounted for 1.9% of the increase.

The retailer had previously announced on September 30 that it would trim its expectations for Q4 if colder weather didn’t arrive during October. That month turned out to be “unseasonably warm”, it said, and the current trading volatility alongside a “very strong” Q4 performance last year led the retailer to cut its full-price sales growth estimate to -2% to +4% for the period, down from its prior estimate of +4%.

That implies full-year sales will be in a growth range of 6-8%, Next said, beneath its previous guidance for 7-10% growth, while its forecast pre-tax profit range has also been cut to £750m-£790m from £775m-£815m.

The new range would still equate to an 8-14% profit hike compared to the prior year, however.

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