UK stock markets tumble as cost of living crisis sees Next cut sales and profit guidance
Shares in companies that depend on consumer spending have plunged after Next, the fashion to homewares retailer, cut its sales forecast for the second half of its financial year and annual profit guidance.
The company used the publication of its half-year results to the end of July to say that there were too many variables at play amid the cost of living crisis to have much confidence in determining consumer demand ahead.
Next, which is widely seen as the most consistent high street performer, reported that it had enjoyed a stronger than anticipated first half with full price sales up 12.4% on the same period last year.
Profit before tax of £401m was 16% higher.
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But it revealed that sales suffered during August before some demand returned in the current month.
Next, which trades from about 500 stores and online, said it now expected full price sales in its second half to fall 1.5%.
It had previously guided an increase of 1%.
The full-year pre-tax profit forecast fell by £20m to £840m but it still represented a rise of 2% on 2020/21.
The company’s shares fell by 10% in early deals while those of high street rivals and other consumer-facing stocks also suffered.
The FTSE 100 and FTSE 250 indexes were both down more than 2% while growing recession fears were also evident on the continent, with the German DAX and French CAC also significantly lower.
Those worst hit on the London Stock Exchange included housebuilders and personal investment platforms.
Next said it was hoping to “see benefits from recent government measures” – namely help for household energy bills – but admitted it was tough to have a clear picture of what lay ahead.
The economy is enduring challenges on many fronts, with sterling hitting record lows this week and government bonds under severe pressure after the mini-budget, prompting Bank of England intervention.
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‘Inflation is going up across the economy’
Both the pound – at $1.08 – and bond yields – the interest rate demanded to hold UK government debt – were relatively stable on Thursday morning as the PM defended the government’s growth plan and the handling of it following the market backlash.
“There are so many variables at play – energy, freight, employment, tax, economic migration, exchange rates, etc – that today, more than ever, it is not possible to predict the future on the basis of the past,” Next said.
“It is over 40 years since the UK last experienced an inflationary shock on the scale we are witnessing today; and the UK economy of the 1970s – with its reliance on highly subsidised and geographically concentrated heavy industry – was incomparably different to the economy of today.
“We have used our recent trade, along with some internal and external economic data, to build a picture of what we think is going on and how the company is likely to be affected over the coming months.”
The company’s results followed weak recent trading updates from rivals including Asos, Boohoo and Primark.
Financial crisis promo
Charlie Huggins, head of equities at Wealth Club, said of the Next results: “The fact that many retailers are struggling shouldn’t be a surprise.”
“This is arguably the most difficult trading environment since the 2008/09 financial crisis. Inflation is at levels not seen for four decades.
“Sterling is in the doldrums, trading at its weakest level against the dollar since 1985. Add to this, the war in Ukraine and the spectre of further interest rate rises. It’s not exactly conducive to consumers restocking their wardrobes.
“Perhaps the biggest issue for the whole sector is that while things look challenging right now, they look set to become even more so.
“This is due to the precipitous decline in sterling which will only exacerbate inflationary pressures.
“Next looks better positioned than most of its peers to weather the storm, and emerge stronger in light of its high margins, robust cash flows and strong balance sheet. But 2023 could be a very difficult year the way things are shaping up.”
A 31-year-old man has been arrested on suspicion of murder after an elderly couple died following a fire at their home in St Helens.
Peter Eric Greener, 77, known as Eric, and his partner Sheila Jackson, 83, were caught in the blaze at their home on South John Street in the early hours of Tuesday.
Mr Greener died on Wednesday, while Ms Jackson died on Thursday.
Eric Greener. Pic: Merseyside Police
Sheila Jackson. Pic: Merseyside Police
Merseyside Police said an accelerant was used to start the fire.
On Sunday, the force said the suspect from St Helens had been arrested on suspicion of murder and remains in custody for questioning.
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Detective Superintendent Rachel Wilson said: “Although an arrest has been made, I would like to take this opportunity to remind people to pass on information directly to police or anonymously via Crimestoppers, and not to comment or post in any way which jeopardises this ongoing work.”
DS Wilson said “extensive enquiries” continue.
She added: “And to that end we are still appealing for anyone with information to come forward, particularly if you live in the area of South John Street and recall seeing or hearing anything suspicious at around the time of the incident.
“Please do not assume what you know has already been reported to us, as we can quickly make that assessment.”
UK
How e-bike riders are doing double the speed limit – and many of them work for fast food delivery firms
It’s lunchtime on Birmingham’s New Street.
Close to its many restaurants, food delivery riders are congregating on their bikes.
The area is packed with shoppers and workers.
PC Paige Gartlan is approaching with other officers. She’s on the lookout for illegally modified e-bikes – and she knows she’ll find them here.
“You can physically tell by looking at the bike that it’s generally going to be illegal – the battery pack is taped on to the sides and generally the size of the motor that’s on the back wheel,” she explains.
Sky News has been invited on an operation by West Midlands Police to find these bikes and get them off the streets.
PC Gartlan has been hit by one before. She’s had to tackle a rider to the floor after he drove into her.
Within minutes, she’s spotted a suspicious-looking bike. The rider makes a run for it – followed by plain-clothed officers.
PC Gartlan tests the bike – it’s showing a top speed of 52km/hr on the speedometer – just over 30mph.
PC Paige Gartlan with a seized e-bike
The speed limit for e-bikes in the UK is 15.5mph when using electric power for assistance.
I look up the street and another two riders have been detained. In less than an hour, officers have confiscated four bikes – all were being ridden by fast food delivery drivers.
The commotion is attracting a lot of attention.
“They are dangerous,” Sandra, who has just finished work, tells me.
Demoz had his bike taken by police
She’s stood watching the riders being questioned. She says she’s had near-misses herself and is worried for the safety of the elderly and children.
It’s not just West Midlands police officers here – immigration officials are carrying out checks too. They’re involved in a nationwide operation, which has seen more than 7,000 arrests in the last year – a 50% increase on last year.
Matthew Foster, the immigration enforcement lead officer for the West Midlands, tells me they’ve already found one individual who has entered the UK unlawfully.
“He’s been detained,” he says, “to affect his removal from the UK.”
Further down the street, police are loading illegally modified bikes on to a van – they’re destined to be crushed. One of them had belonged to Demoz.
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An e-bike seized by West Midlands Police
He’s on his way home, carrying a big box with the logo of one of the main fast food delivery firms on it.
He tells me he used to have an illegal bike, but he thought his new one was legal.
“I make a mistake, I have to say sorry, I will do better for the future,” he says.
I get in touch with the big delivery firms; Deliveroo, Uber Eats, and Just Eat.
Their representatives say they constantly remind workers of their safety obligations, and that they’re all working closely with the government to increase security checks on riders.
As he leaves, Demoz, now bike-free, tells me he’s thinking of changing his job.
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