The fashion chain Next is set to shine a light on the health of the retail sector in the aftermath of the ‘significant’ Christmas shopping period.
Investors will keep a close eye on the clothing and home goods giant’s trading update on Thursday for more details on its festive season sales.
In August, chief executive Lord Wolfson said it was likely that shoppers would spend less in the second half of the year as commodity prices rose.
The cautious approach, analysts say, means investors can’t hide a big surprise in Thursday’s post-Christmas update, but the past few weeks have been a “key pillar” of current consumer spending habits. will be
The company expects to reveal a 2% decline in list price sales in the fourth quarter of this year compared to the same period last year.
However, it expects profit before tax to reach £840m, up 2.1% compared to the previous year’s reported £822m.
AJ Bell analysts Russ Mold and Danni Hewson said: No company listed in the 100 has proven immune to the challenges posed by the pressure on consumers’ pockets from inflation, uncooperative weather and the cost of living crisis.
“The expected decline in festive periods not only reflects pressure on consumer incomes, but Next’s customers may be a classic example of a squeezed middle ground, but last year’s pandemic easing It also reflects a tougher basis for comparison, as it benefited from and came to an end: lockdowns and pent-up demand.”
In a tougher economic environment, investors also want to know if Next is noticing an increase in shoppers using credit options to fund purchases.
The rise in ‘bad debt’ could indicate that more shoppers are relying on struggling credit, and could be used as a litmus test paper for the broader retail sector.
Meanwhile, Next announced in December that it had bought rival fashion chain Joules for £34m, saving the troubled brand from bankruptcy.
It adds to the celebrity portfolio it currently owns, following the group’s acquisition of furniture business Made.com’s brand, website and intellectual property.
Nineteen Joules stores are set to close after the deal, and Next may reveal more slated store closures in a deal update.