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Shares in Next have fell 6% this morning following a gloomy assessment of the UK economy.
The retailer was the top faller on the FTSE 100 index, despite reiterating its profits and sales guidance for this year.
Investors will have noted that Next believes “the UK economy is likely to weaken going forward,” and warned that “The medium to long-term outlook for the UK economy does not look favourable.”
AJ Bell’s Russ Mould said: “Retailer Next has a reputation for straight talking, so its stark take of the prospects for the UK economy will carry weight.
“A gloomy assessment allows for some expectation management about Next’s future sales, with growth forecast to slow significantly in the second half of its financial year. It is worth remembering that the company has got under-promising and over-delivering down to a fine art – a key component of being a successful public company.
“As a case in point, Next easily beat its first-half sales guidance with its latest results, helped by one-off factors like the sunny weather and picking up business as rival Marks & Spencer struggled with a cyber-attack.
“The company’s overseas operations are still in their infancy but are growing rapidly, and this could be important if Next’s domestic market becomes more difficult. Most of its foreign sales are in Europe and the Middle East, which are relatively easy to service from the UK, so Next should be able to pull this growth lever without the requirement for significant additional capital expenditure.
“While its share price fell on the latest update, Next may not mind a little heat coming out of the stock too much given it had been trading close to recent all-time highs. The group is clearly looking to give itself an easier bar to clear in the coming months by leaving full-year guidance unchanged despite the first-half beat.”
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