Next cut sales and profits forecasts on Thursday, on the back of a weakening economic outlook and the recent turmoil in currency markets.
The fashion and homewares retailer said it had enjoyed a strong first half, with increases in both profits and sales.
But since then trading had been below expectations, and while sales improved in September, it warned that cost of living pressures were “set to rise in the coming months”.
In particular, Next noted: “The devaluation of the pound looks set to prolong inflation, even once factory gates prices ease. It looks like we may be set to have two cost of living crises: this year a supply side-led squeeze, next year a currency-led price hike as devaluation takes effect.”
Next said the government could and should help the UK through the cost of living crisis. But addressing last week’s controversial mini-budget, which saw the government announce £45bn of tax cuts, funded by borrowing, it warned: “Borrow and spend remedies can ultimately only treat the symptoms of inflation; they are not the cure.
“And there is a balance here, as we are already seeing: when a government borrows too much their currency will devalue and stoke inflation next year.”
Next now expects full-price second-half sales to be down 1.5% on the previous year, compared to earlier guidance for growth of 1%, while full-year profits forecasts have been trimmed to £840m from £860m.
In the six months to July end, full-price brand sales rose 12.4%, with total trading sales ahead 13% at £2.4bn. Pre-tax profits jumped nearly 16% to £400.6m.
The retailer said: “We had a good first half, with overall sales ahead of expectations, driven by over-performance in our retail sales and strong performance from the formal parts of our clothing ranges.”
