Shares in Next, UK clothing groups slump on price warning
British clothes retailer Next on Wednesday warned of a tougher trading year ahead as uncertainty caused by Brexit weakens the pound and pushes up the cost of raw materials.
Shares in Next slid 11 percent on the news, dragging down stock values of clothing competitors Marks and Spencer and Associated British Foods, which also owns budget garment chain Primark.
In a trading update, Next said the weak pound would result in prices of its garments rising by up to five percent in its financial year to January 2018.
"In the year ahead we face a number of inflationary pressures in our cost base," Next said in a statement.
British annual inflation is at the highest level in more than two years as a slide in sterling to multi-year lows against the dollar and euro following the Brexit vote in June has lifted the cost of raw materials imported by Britain.
"We may see a further squeeze in general spending as inflation begins to erode real earnings growth," Next added.
The group did, however, note that its overseas sales would be boosted this year by the currency's weakness.
A weak pound makes British-made goods more price-competitive than those made by foreign rivals.
Following a weak Christmas trading period, Next said pre-tax profits would be slightly lower than expected for the year to January 2017.
They could tumble by as much as 14 percent in the year to January 2018, but may fall by only two percent, it said in further guidance Wednesday.
Next added that "in the light of the exceptional levels of uncertainty in the clothing sector and with little visibility of the approach the UK government will be taking to Brexit", the company had decided to bring forward the announcement of dividend payments to shareholders through the use of surplus cash.
© 2017 AFP