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Next slumps on 'challenging' UK high street warning

Retailer cuts full-year profit guidance and warns of 'challenging' UK consumer environment, placing yet more pressure on the shares.

 
Next slumps on 'challenging' UK high street warning
 

Next (NXT) has fallen to the bottom of the FTSE 100 as the retailer cut profits guidance, warning of a bleak outlook for the UK high street.

Next shares fell 5.8% to £41.55, bucking a rising FTSE 100, which added 23 points, or 0.3%, to 7,258 as European markets advanced on hopes that Emmanuel Macron would win the French presidency this weekend over Marine Le Pen following the television debate between them last night.

The fashion retailer reported a 3% fall in sales in the three months to the end of April and cut the upper end of its full-year profits guidance from £780 million to £740 million.

'The UK consumer environment remains challenging, particularly in the clothing and homeware markets, and real wage growth is now close to zero,' it said.

Shares in the business have lost nearly half their value since a late 2015 peak, amid warnings consumers were spending less on clothing and footwear as inflation rises, a trend underlined in otherwise positive services data released today.

The news from Next represents a blow to Neil Woodford, one of the company's biggest investors, who holds 1.5% of his £10 billion Woodford Equity Income fund in the stock.

It also dragged down shares in rival Marks and Spencer (MKS), which fell 2.4% to 357.6p.

'Whichever way it turns, Next just can't seem to catch a break at the moment,' said George Salmon, equity analyst at Hargreaves Lansdown. 'Online competition is ratcheting up, weaker sterling is increasing costs and conditions on the UK high street are far from favourable.'

George Mensah, analyst at Shore Capital, said Next was suffering not only from poor high street conditions, but also a structural challenge in its business.

'We do not expect this to relent with notable movements from the competitive set, we highlight the recent introduction of an own-label ('Find') from Amazon Fashion, which is demonstrating clear ambitions in general apparel, and the announcement of Jill McDonald (currently Halfords (HFD) chief executive) as the managing director of beauty at Marks and Spencer,' he said.

'Whilst management has outlined the desire to address some shortfalls in its range offering, aimed at its core demographic, for its autumn / winter range, we believe any positive impact from this will not be sufficient to offset the pressures impacting its proposition.'

There was better news from HSBC (HSBA), which rose over 4%, or 26.4p, to 671.6p as investors focused on the underlying 12% growth in first quarter profits at the bank rather than the 18% plunge in statutory profits caused by the writedown in value of its Brazilian business among other things.

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