LONDON: British clothing retailer Next forecast lower profit in its 2023-24 year, reflecting uncertainty over whether consumers would keep spending during a recession and as the group’s costs rise.
Next trades from about 500 stores and online and is often considered a gauge of how British consumers are faring. It is the first major UK apparel retailer to report on Christmas trading.
The group raised its forecast for year to January 2023 pretax profit to 860 million pounds ($1.03 billion) from a forecast of 840 million pounds previously after full price sales rose a better than expected 4.8% in the nine weeks to Dec. 30.
But it said it was cautious in its outlook for the 2023-24 year, forecasting full price sales down 1.5% and pretax profit of 795 million pounds, down 7.6% on 2022-23.
Prior to the update analysts were on average forecasting pretax profit of 783 million pounds for 2023-24, according to Refinitiv data.
The UK consumer outlook for 2023 is poor, given inflation is running at 10.7% and consumer confidence is close to record lows. Taxes and mortgage rates are increasing, government support on household energy bills is set to be scaled back and the risk of higher unemployment in a recession is growing.
Retailers are also facing cost inflation in the goods they buy as well as higher labour and energy costs.