Clothing retailer Next's brand total sales edged up by only 0.4% in the quarter ahead of Christmas in a set of results the company called "disappointing". The firm said that the warmer than expected autumn and early winter months were responsible for the lukewarm sales results.
"We believe that the disappointing performance in the fourth quarter was mainly down to the unusually warm weather in November and December," the firm said in a statement. However, Next executives added that it would not want to "allow difficult trading conditions to mask any mistakes and challenges faced by the business".
Next retail sales were down -0.5% while the Directory division, for which it had high hopes, edged up a disappointing 2%. It did mention that gross margins were maintained because the retailer did not offer stock before the End of Season Sale, which will help increase profits.
The retailer's full year profit guidance is now at £817m, at the lower end of previous estimates.
Next's Directory's sales especially were disappointing, the company said, blaming the performance on poor stock availability in the whole of the quarter. It also said a tough market for online retail weighed down sales.
In September 2015, Next announced it will increase prices by 6% in order to make up for extra costs that will come from the introduction of the national living wage, which was announced in July. The company said in the long term, the new wages will cost £27m (€37m, $42m) and it will raise retail prices in order to prevent its margins from shrinking.
Ken Odeluga, a senior market analyst at Spreadex.com commented: "The markets got their first real taste of what is set to be a tough earnings season for UK retailers this morning, with the normally solid Next posting a warm weather-blamed 0.5% fall in fourth quarter (i.e. Christmas period) high street sales."
"Understandably the news set Next lower by 3%, sending the stock at lows not seen since the start of 2015, whilst also causing an early fall for M&S, which posts its own (reportedly worrying) figures on Thursday."