Next slashes profit forecast in grim warning for High Street

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EXT today cut its profit forecast after a tough summer, a worrying indicator for the rest of the high street and the wider economy.

Shares quickly tumbled 8% to 4887p from 437p as the city fretted over the outlook for what is widely regarded as one of Britain’s best companies.

Chief executive Simon Wolfson has offered some support for the government’s tax-cutting policies, but is clearly concerned about the borrowing costs they will incur.

He said, “Borrowing and spending medicine can only ultimately treat the symptoms of inflation; they are not the cure. And there is a balance here, as we already see, when a government borrows too much, its currency will devalue and fuel inflation next year.

Profit for the year will be £20m lower at £840m and sales will fall 1.5%, instead of rising 1% as he had previously forecast.

Since most apparel and homeware factories price their products in dollars, costs are expected to continue to rise next year. The weak pound could further aggravate pressures on the cost of living, Wolfson warned.

Half-year profits rose 16% to £401m, a sign of Next’s resilience.

But Wolfson told Standard that things “are more likely to get worse than better”. The current market and energy crisis is not as bad as the 2008 credit crisis or Covid, he said.

Wolfson, a conservative peer, believes that while “we can see the benefits of recent government action”, the bigger picture is hard to describe.

He thinks Prime Minister Liz Truss should focus on “drastically overhauling our planning system, smartly relaxing controls on economic migration, energy market reforms, liberalizing trade tariffs and more. “.

He added: “The government could also review its own capital spending. If they can identify and scale back investment projects that offer little value, they will reduce borrowing and reintroduce desperately needed goods and services back into the economy (without prejudice, HS2 would be high on our list for consideration).

Rosalind Hunter of Simon-Kucher & Partners, said: “The forecast reflects the difficulty of navigating current environmental advice faced across the country. Sales and earnings forecasts have been lowered and its clear performance will be highly dependent on external factors over the coming months. While their costs, mostly expressed in US dollars, are now starting to stabilize, the impact of the devaluation of the pound is clearly counteracting this.

AJ Bell’s Russ Mold said: “If Next is in trouble, you can be sure the retail industry is in trouble. Among the most consistent retailers, the company has an excellent track record and is a very transparent communicator with the market. The message he must deliver is worrying.

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