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Next enjoys sales rise over Christmas

12 January 2018

Next has upped its FY2017/18 sales and profit expectations on the back of a better than expected Christmas sales performance.

Sales in the group's retail stores and online were both said to have experienced an improvement, with online, where sales rose by 13.6 per cent, performing "particularly well".

Investec's Alistair Davies noted that the consensus forecast was for a fall of 0.5% in the festive period, with a range from -2.4% to +1.3%, with the consensus for a 8% retail decline and 9% Directory gain.

Part of the improvement, the company said, was down to much colder weather leading up to Christmas.

Online sales for the 54-day period were up 13.6% on past year.

The retailer warned that numerous challenges it faced a year ago, such as subdued consumer demand and lower spending on clothing, would persist in 2018. Nonetheless Next reported that the amount of stock it sold at a discount was down 6 per cent on the year before.

The retailer upgraded its central pretax profit guidance for the full 2017-2018 year, forecasting £725 million, up from previous guidance of £717 million but below the £790.2 million made in 2016-17.

Next is budgeting for full price sales next year to grow by between -2% and +4%, with the mid-point of +1% versus the +0.3% expected this year. Central guidance for group profit has increased by GBP8m to GBP725m and profit guidance range is now GBP718m to GBP732m.

However, chief executive Lord Wolfson said the retailer was now much more optimistic about its prospects compared with this time a year ago when it issued a profit warning.

Next's shares were also supported by its decision to return an expected £300mln in surplus cash next year to shareholders through share buybacks rather than special dividends.

Shares in the retailer were up 8.89 per cent in morning trade at £49, reports The Telegraph.

Sofie Willmott, senior retail analyst at GlobalData, notes the retailer's choice to participate in Black Friday for the first time in 2017 will have driven traffic online and footfall into stores, benefiting full price sales at a time when retailers were ferociously fighting for a share of shopper spend.

George Salmon at Hargreaves Lansdown said the results were good news for investors across the retail sector.

"Colder weather may have boosted sales in the run-up to Christmas, but the real positive is the more optimistic outlook from Next's CEO Simon Wolfson".

Next enjoys sales rise over Christmas