Trading statement
CHRISTMAS TRADE
The combined sales of Next Retail and Next Directory for the period from 29 July to 24 December 2008 were down -1.9% compared to the same period last year.
Next Retail sales were down -3.0% in the period. Like for like sales in the 347 stores that were unaffected by new openings were down -7.0%.
Next Directory sales were up +1.1% in the period.
Like for like sales were within the guidance range of -4.0% to -7.0% we gave in September and repeated in November. This was despite a worsening consumer environment and a significant increase in competitor markdown activity prior to Christmas. Next maintained its policy of trading at full price up to Christmas and stocks were well controlled going into the end of season Sale. We started our Sale with 8% less stock than last year. After a good start to the Sale period we now expect clearance rates to be ahead of last year.
PROFIT AND EARNINGS PER SHARE FORECASTS
Our full year profit forecast for the year to January 2009 remains in line with our previous expectation and current market consensus. The majority of City profit forecasts are currently in the range of £415m to £435m. This equates to earnings per share of between 152p and 160p which represents a decline of between -5% and -10% for the full year.
OUTLOOK FOR 2009
As we mentioned in November, 2009 looks set to be another
challenging year. We are again budgeting very conservatively, with
negative like for like sales for the full year, and we believe the
first half will be particularly difficult. We expect Directory to
remain less affected by the downturn than Retail, and are currently
budgeting for sales in Directory to be only marginally down for the
full year.
Outlook for the Consumer
We anticipate that consumer demand will remain weak during 2009,
although we would caution against some of the more extreme economic
forecasts. On the negative side, we expect falling house prices,
unemployment and the fear of unemployment to continue to restrain
spending. However, there is some relief in sight for the consumer;
food, fuel and energy prices are set to fall during the year and
many will begin to benefit from reducing mortgage interest charges.
Whilst these reductions may not translate into immediate increases
in spending they will give people the chance to get their finances
in good order in the year ahead.
Currency
The weakness of Sterling will be a major issue for the retail
sector over the coming year. The majority of our currency
requirements for Spring Summer stock had been covered before
Sterling's substantial and rapid devaluation, so we expect the
impact in the first half to be limited. As stated previously, we
anticipate that in Autumn Winter there will be significant upward
pressure on prices and downward pressure on margins as a result of
Sterling weakness. The extent of these pressures will become more
apparent as we negotiate and re-source our Autumn Winter
stock.
Financial Resilience
Next is well placed to weather the downturn. Our balance sheet
remains robust with forecast year end net debt in the region of
£670m. This is comfortably financed by a long term bank
facility of £295m (2013) and fixed interest bonds of
£300m (2013) and £250m (2016). Over and above the
amount we need to finance the business we have a £150m bank
facility committed until November 2010. Interest costs in the
current year will be covered 12 times by EBITDA. We anticipate that
our interest charge will fall in the year ahead and cash flow will
again be strongly positive after paying interest, tax and
dividends.
Priorities
Our overriding priority remains the development of the Next
Brand. Our focus will continue to be the development of great new
ranges of well designed, excellent quality, clothing and home
products. We will closely manage our costs and endeavour to make
further efficiencies in our operations. We will continue to invest
in refits and new openings, albeit that these will be at lower
levels than the current year.
NOTICE OF FULL YEAR RESULTS
We intend to issue our preliminary results for the 52 weeks to 24 January 2009 on Thursday 26 March 2009. The first of our quarterly trading statements will be in early May 2009.
END