Next better hope that British shoppers are a little less fickle than the weather, because sales performance is so volatile the firm has no idea what to expect over the vital Christmas trading period. This is a worry, although there does seem to an improving trend in sales growth throughout the year that may calm nervous investors.

Management warned that ‘sales performance has remained extremely volatile and is highly dependent on the seasonality of the weather’. A cooler August and September meant shoppers bought warmer clothes and sales were up significantly on last year. Industry-wide textile, clothing and footwear sales were +7.2% in September, according to the ONS. October is looking a lot less impressive for Next with full price sales down in every week from last year.

Most worrying, Next says sales volatility makes it ‘very hard to determine any underlying sales trend’.  This poses significant problems for investors. As a benchmark it’s plumped for the full price sales for the year to date, which are down -0.3%. But it could be well wide of this mark.

Overly-pessimistic? Chief executive Simon Wolfson is not known for being the most upbeat and again the bar is being set pretty low.

Given that sales in Q3 rose 1.3%, from +0.7% in Q2 and -3% in Q1, there seems to be a positive underlying shift. However Q3 2017 was up against a very weak comparative quarter (down ‐3.5% on 2015), while the Christmas trading period last year was down just ‐0.4%, making for a tougher comparison. Given the lack of visibility, it’s probably wise to be cautious.

Based on this guesswork profit expectations are broadly unchanged for the year, but with nine months behind us already these have actually been narrowed from both the top and bottom end of the range. Group profit before tax is being guided at between £692m and £742m, which means profits are set to be between 6.1% and 12.4% down on last year. That is a little tighter than the £687m-£747m guided in September.

In terms of sales, it’s very much more of the same – Retail suffering and Directory doing all the heavy lifting. Retail sales fell -7.7% in Q3, in lock step with the trend for the year to date but significantly worse than was expected for the quarter (consensus was around -3.7%). Directory sales are accelerating - up +13.2% for Q3 and +9.4% YTD.

As ever when talking about Next’s problems in growing sales amid a tough retail market, the business remains strongly cash generative even if it’s not expanding rapidly and is able to maintain solid returns to investors.

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