FASHION chain Next said it faced a double challenge from a weaker pound and a faltering economy in 2009 as it unveiled a 14% fall in annual profits.
The firm expects like-for-like sales at its high street outlets to slide by between 6% and 9% during a “particularly difficult” first half of the year.
This is at least as bad as the 6.5% fall registered during 2008, which saw pre-tax profits down to £428.8m in the year to January 31.
“Weakness in the general economy means we must plan for a fall in like-for- like sales for the full year,” said the company. “In addition, the weakness of sterling will put strong upward pressure on cost prices.”
Next also expects sales at its directory and catalogue business – a key driver of profits in recent years – to be down by as much as 2% in the first half of this year.
The firm painted a bleak economic picture for 2009 as fears over job losses and falling house prices undermine consumer confidence.
Even for those still in work, the benefit of lower mortgage payments and fuel bills would be more than offset by the gloomy sentiment – encouraging people to save rather than spend, the retailer said.
The company, which posted revenues of £3.27bn, said it had been working with suppliers to protect customers from “unaffordable” price rises as the value of the pound sinks.
But it also warned of a long-term inflation threat in 2010 as the weak pound, a return to higher VAT rates and rising business rates put upward pressure on prices.
Next was one of the few firms not to cut prices in the run-up to the most difficult Christmas season in years.
The firm, which has 510 stores, including ones at the Kingsgate Centre and Great Northern Retail Park in Huddersfield, said it would maintain its pricing policy to preserve margins and protect the brand.
“We have decided that we will not devalue our ranges and will maintain our market position,” said the firm.
“We believe that in the long term, this integrity will provide us with a solid platform for growth when the economy recovers.”