Britain’s recent warm weather helped fashion retailer Next reach higher than expected sales over the last few months. However, the retailer warned that this boost from the heatwave was unlikely to last.
According to data, Next’s sales rose 2.8% in the 12 weeks leading up to July 28. This jump in sales was driven by an increase in online sales (12.5%) as consumers updated their summer wardrobes to battle the heat. At the same time, however, sales at Next shops fell by 5.9% over the same period. This likely led to the shared caution that some of the sales growth reflected purchases consumers might have made in August.
“We believe that this overachievement in sales was due to the prolonged period of exceptionally warm weather, which greatly assisted the sales of summer weight product.”
The retailer went on to share that “It is almost certain that some of these sales have been pulled forward from August, so we are maintaining our sales and profit guidance for the year to January 2019.”
Why are UK retailers struggling? Chief executive, Simon Wolfson, recently called on the government and landlords to reduce the burden for high street retailers. Wolfson explained that it has become a real challenge for these shops to remain profitable. According to him, space is not the problem – it’s rent.
“It is a simple equation on whether 550 locations are profitable or not. If [a store is] not profitable it will have to shut or get a rent reduction.”
Wolfson says that Next was already negotiating average rent cuts of about 25% when leases came to an end. It was also mitigating the costs of stores by bringing in concessions. These concessions not only brought in additional income, but also gave shoppers another reason to stop by.
Even so, the tough conditions on the high street continue, as household names like House of Fraser fight to survive. Shares recently fell 7.5% after the trading update was published. Unfortunately, Next was the biggest faller on the FTSE 100. Another reminder of the present situation that has led to hundreds of stores closing and thousands of jobs lost in recent months.
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