Partner Article

Next slumps following high-street disappointment and 2012 outlook

Markets opened marginally lower across Europe following strong gains in the last few trading days and ahead of a German 10 year bund auction, an event that was marred by disappointment last time round as it failed to raise the targeted amount of debt in November. Today’s auction went more successfully, drawing total bids of 5.14 billion at an average yield of 1.93%. This helped to diffuse fears that Europe’s “power house” was being enveloped by the ongoing debt crisis, with the relatively weak demand perhaps not surprising given the extremely low yields.

There was a raft of domestic high street news for digestion, industry heavyweights John Lewis and Next somewhat divergent in their reports. The former delivered strong results with like-for-like sales up 6.2%, with sales of household and fashion goods especially strong in the run up to Christmas. Whilst in revenue terms the partnership performed well, is likely that price matching reduced margins and hence profitability.

The market didn’t however react warmly to Next ‘s Trading Statement which highlighted weak high street retail sales since the 1st August , in contrast to its historically upbeat January announcements. CEO Simon Wolfson’s, usually known for his optimism, admitted that there had been a deterioration in the economic and consumer environment, particularly during November and December when headlines from Europe were emerging. He highlighted numerous headwinds for 2012 and it was this troubled outlook that seemed to particularly spook the market. Analysts were quick to point out however that Next was almost alone in not heavily discounting its products during a period that saw its overall sales up 3.1%, a figure comprised of a disappointing 2.7% fall in retail sales but a more welcome 16.9% increase in Directory revenue. Despite this the shares ended the day as one of the FTSE 100’s worst performers, down 3.1% at 2656p.

The wider UK market finished the day down 0.55%, coming off its lows in late afternoon that had seen the index down closer to 1%.

This was posted in Bdaily's Members' News section by John Dance .