Business

Next shares slide on consumer spending warning

Shares in Next have slid almost 8% after the fashion retailer warned that consumer spending could dip in the coming months.

The company said government cuts designed to reduce the budget deficit would hit consumer confidence.

This could lead to a fall in like-for-like sales for the second half of the year of between 1.5% to 4.5%, it said.

Next also said that its prices would rise next year by between 5% and 8% due to costs increasing.

These include the increase in VAT, which goes up to 20% in January, higher cotton prices and exchange rate movements, the company said.

Retailer Carpetright also said it was cautious about the outlook for consumer spending for the remainder of the year.

Profits rise

In a trading statement, Next said: "There has been a noticeable cooling in retail demand in recent months; the mood amongst consumers is best characterised as cautious.

"We believe that consumer spending will be more restrained in the second half that in the first, as spending cuts and tax rises begin to take effect".

However, Next added that its online business, Next Directory, would continue to grow strongly.

While the retailer said like-for-like sales, which strip out sales from new stores, could fall in the second half of the year, it said total sales could vary from a year earlier by between -1.5% and +1.5%.

The group also forecast a full-year pre-tax profit of between £535m and £560m, up from £505m in 2009, which it said was in line with market expectations.

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