LONDON (Reuters) - British clothing retailer Next lowered its full-year profit guidance on Thursday after cash-strapped shoppers stayed away from its stores in the first quarter, sending its shares down almost 7 percent.
Britain's most successful clothing store chain in recent years, Next said the consumer environment remained challenging with rising prices eroding shoppers' spending power, forcing them to cut back on clothes and homewares.
The value of full-priced goods sold in its stores in the 13 weeks to April 29 was down 8.1 percent. While online sales rose slightly, it was not enough to offset the downward pressure and total sales were down 3 percent in the period.
Analysts at Jefferies had expected the store sales to be down around 5 percent. The drop to 8.1 percent also marks a sharp decline on the previous year when they fell by 2.9 percent.
As a result, Next said it now expected pretax profit for the year to come in between 680 million pounds and 740 million pounds. Previously the upper end of its guidance was set at 780 million pounds.
Its shares, which have fallen 16 percent in the last year, were down 6.7 percent by 0720 GMT.
"The UK consumer environment remains challenging, particularly in the clothing and homeware markets, and real wage growth is now close to zero," the group said.
"With the first quarter of the year complete, we are now able to narrow our profit guidance range."
Next had grown rapidly in the previous 10 years but it started to sound the alarm in 2015 when it said that Britons were spending less on clothes and footwear.
That situation has been compounded this year by the squeeze in consumer spending, while the plunge in the pound following the vote to leave the European Union pushes up the price of imported goods.
"In our full year results announcement in March we talked about omissions in some of our product ranges," it said. "We said that we expected some improvements from May onwards, but that our ranges would not be where we wanted them to be until the Autumn season in September.
"We still believe this to be the case."
