Economy

Next enjoys belated Christmas present as sales surge

Next enjoys belated Christmas present as sales surge

"We believe part of this improvement has been down to much colder weather leading up to Christmas".

Meanwhile, stock for the end-of-season sale - including Black Friday offerings - was "well controlled", down 6% on past year.

The 1.5% increase in the 54 days to 24 December has led the high street chain to upgrade its profit forecast and signalled that inflation pressures are set to ease.

A strong performance in online sales allowed Next to reduce its stock its end-of-season sale by 6% compared to past year, he said.

While Next remains cautious for the year ahead, aware that consumers' budgets will remain restricted, Willmott says FY2017/18 with full price sales in positive territory will give the retailer the confidence to compete in what will continue to be a highly competitive retail landscape.

As a result, and with clearance sales since Christmas in line with expectations, full year profit guidance has been lifted by £8m to £725m as the midpoint in a £718-732m range that will be determined by the January performance in sales in January.

However, the firm added that it believes that "some of these headwinds will ease" through 2018, with inflation falling to 2% in the first half and disappearing in the second. Central guidance for group profit has increased by GBP8m to GBP725m and profit guidance range is now GBP718m to GBP732m.

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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.

Next shares rose more than 8 per cent to 4,893p in morning trading as investors welcomed the update. He said 2019 guidance was just slightly above the City consensus estimate of £703m.

The Co-op also enjoyed a bumper Christmas, with sales up 6.2% at established stores in the two weeks to 1 January.

Inflation hit a multiyear year high of above 3 per cent at the tail end of 2017, and wage growth has been stagnant which has weighed on consumers' appetite for spending - especially on non-essential items.

High Street retailer Next performed better-than-expected over the Christmas period thanks to the UK's extended period of cold weather, the company said on Wednesday. "Next should now have a sourcing tailwind in 2018, which will help it to hold gross margins and improve the quality of its offer".

That is good news for everyone - whether or not you shop at Next.

This implies management believes the shares represent good value at the moment, according to George Salmon, equity analyst at Hargreaves Lansdown.


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