Why the Indian summer is bad for business

Shoppers in Harrogate enjoy the unseasonably mild weather today.
Picture by Gerard Binks — Shoppers in Harrogate enjoy the unseasonably mild weather today. Picture by Gerard Binks

Fashion retailer Next warned that the unseasonably warm weather will knock £25m off its profits as women eschew the autumn fashions and stick with their summer outfits.

As temperatures soar to 20C and forecasters predict warm weather in September and October will make 2014 one of the hottest years on record, Next warned it could see a fall in sales over the key Christmas quarter.

The firm, which has been outperforming its rivals, said sales grew by 5.4 per cent in the third quarter to October 25, compared with original expectations of 10 per cent.

The warm weather has hit demand for jumpers, coats, jackets and scarves.

Next chief executive Simon Wolfson said: “Whilst a cool August meant that the season started well, this was more than offset by much weaker sales in September and October.”

The firm revealed that sales fell year-on-year for three weeks out of four in September and they were flat in two weeks in October.

The fashion retailer warned that fourth-quarter sales are likely to be between minus two per cent and plus four per cent, down from a previous expectation of plus four per cent.

The news sent chills throughout the high street and shares in both Marks & Spencer and Primark’s owner ABF were hit.

M&S is expected to report similar woes when it reports half-year results next week. Analysts at Citi cut M&S’s clothing sales forecasts from minus one per cent to minus four per cent in the three months to September 30.

The warm weather has been keeping shoppers away from the high street, according to the British Retail Consortium. It said that footfall in shopping centres fell by 2.6 per cent in September.

Mr Wolfson said that despite the slowdown, Next will stick to its decision to hold off discounting until its popular Boxing Day sale.

“We never discount before Christmas, haven’t done for 20 years,” he said.

He added that the warm weather will keep gas and electricity bills lower which means customers may be ready to splash the cash in the future.

Next, which overtook M&S with a £695m annual profits haul earlier this year, had been enjoying its strongest sales growth for many years.

Cantor Fitzgerald analyst Freddie George said the fashion sector is having to cope with more extreme weather patterns.

Analyst Sam Hart at Charles Stanley added: “We expect trading conditions in UK general retail to remain challenging over the medium term, with the consumer environment likely to stay relatively subdued and the competitive landscape intense.

“The vagaries of the British weather will inevitably continue to influence short term trading performance.”

Next, which has 42 stores in Yorkshire, said it now expects full-year pre-tax profits to rise 11 per cent to £770m, down from the previous forecasts of £795m.

Weather forecasters are predicting a return to more seasonal norms next month, although the weather is expected to stay on the warm side.

Rachel Vince, a forecaster for MeteoGroup, said November will bring typical autumnal weather which will be windy and rainy at times with some warm spells as well.

“Changeable is the best way to describe it,” she said.