Next sees a strong Christmas period

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NEXT, which has a high profile store at the £350m Trinity Leeds shopping centre, yesterday emerged among the winners from the festive trading season.

The company, which is Britain’s second-largest clothing retailer, raised its yearly profit outlook on the back of pre-Christmas sales that topped its own forecast.

Shares in the company, which are up 47 per cent over the last year, rose again to a record high after it said total sales rose 11.9 per cent in the November 1 to December 24 period, helped by its policy of not offering price-cutting promotions before Christmas.

Sales in the year to December 24 were up 5.0 per cent, 1.25 per cent ahead of the top end of guidance issued in October.

Next’s performance stands in stark contrast with Debenhams, which issued a profit warning on Tuesday, blaming the highly promotional pre-Christmas environment and mild weather, which curbed demand for warm winter garments. Alongside Next in the winners category so far are department store groups John Lewis and House of Fraser, which both posted positive statements on Thursday.

However, Next cautioned investors not to expect a continuation of the level of growth it saw in the run-up to Christmas, predicting sales growth of between three and seven per cent in its 2014-15 financial year.

Chief executive Lord Wolfson said that although the economy was likely to continue to steadily improve, lack of growth in real earnings looked set to persist and there was no reason to expect a significant increase in consumer spending in 2014.

“We wouldn’t want people to believe that there’s going to be a return to the sort of levels of consumer expenditure growth that there were in the early 2000s,” he said.

Lord Wolfson also cautioned that a return to economic growth was likely to result in higher interest rates which, in turn, was likely to moderate the spending of those with mortgages.

The outlook for UK consumer spending may become clearer next week when Tesco and J Sainsbury, also issue trading statements. Next attributed its encouraging performance to improvements in its seasonal knitwear, nightwear and gift offers.

It also said that increased confidence in online deliveries meant more customers continued to trade via the Next Directory internet and catalogue business right up to the weekend before Christmas.

Next Directory sales soared 21 per cent, while sales at the group’s more than 500 stores in Britain and Ireland – and about 200 stores in over 30 countries overseas – increased 7.7 per cent.

Apart from its retail operations, Next also has a distribution centre in South Elmsall.

John Foley of PTSG

PTSG’s results are set to be in line with board’s expectations