Shares in retailer Next are wearing the biggest loss on the FTSE as investors turn their nose up at its latest trading statement.
Q2 Sales growth of 2.8% YoY was slower than Q1. This was expected after Q1 strength (+6%) was flattered by an easy comparison period. And the quarter was ahead of the 2.2% FY growth guidance given in May. So far so good. Except that growth missed consensus (Retail -5.9% vs -5.3% est; Online +12.5% vs +12% est; Total +2.8% vs 2.9% est). Online beat, yes, it is growing more quickly, and it contributes more in terms of profits, but Bricks & Mortar Retail remains the dominant sales channel.
The quarter’s performance is explained almost entirely by glorious weather, which the company is certain will have brought forward many August purchases. This implies Q3 could see another sequential slowing of growth into the key Autumn/Winter season. Furthermore, weekly sales patterns have been volatile and growth distorted by end-of-season sales (a weak earlier than usual), making it difficult to identify an underlying sales trend. Not great messages, clearly preventing the company from turning more bullish for the year.
In fact, even with 4.5% growth under its belt for the first half, no upgrade to the 2.2% forecast for the year implies second half growth of precisely zero. Q3 could be critical.
