Cautious Next weathers tough 54-day Holiday trading with surprise full-price sales gain, outlook imp
Phew! Predictions of a swathe of poor UK January trading statements, beginning with high-street giant Next this morning, look overstated already… well at least analysts got the first one wrong.
Next, the first out of the blocks this month with those all-important Holiday trading figures, said Wednesday the 54 trading days to December 24 saw full-price sales rise 1.5%, easily outpacing the 0.2% gain for the fiscal year-to-date. Its shares were up 7.6% in early trading.
OK, it’s not great news, but the latest figure was well ahead of its November guidance that full-price sales for the period would fall 0.3%. Also, 1.1% of that 1.5% gain was due to increased selling space.
But for the full year, it’s now predicting total full-price sales to rise 0.3% rather than falling by the same amount it expected. As a result, Next increased its full-year profit guidance by £8m to £725m.
Next said both online and physical store channels “experienced an improvement in sales” but, as expected, online was by far the strongest.
Digital full-price sales jumped 13.6%, better than the 10.4% increase Next has seen for the financial year-to-date.
Although offline full-price retail sales fell 6.1% in the period, that was better than the 7.2% decline experienced for the year so far.
And its clearance performance? Next said that stock for its end-of-season sale (including the stock it put into its Black Friday event) was “well controlled and down 6% on last year.” It also said clearance rates are in line with its expectations and “are consistent with the profit guidance we gave in November.”
Its trading statement also showed progression through the year with Q1 having seen a 3% sales decline followed by a 0.7% increase in Q2, a 1.3% rise in Q3, with the current period up 1.5%.
Although the retailer is still in turnaround mode saying that many of the challenges it faced last year “look set to continue into the year ahead”, it also said it expects “some of these headwinds will ease” as it moves through the year.
Those headwinds include subdued consumer demand “driven by a decline in real income, the increase in experiential spending at the expense of clothing, and inflation in cost prices”.
It added: “We already know that cost price inflation will reduce to 2% in the first half and believe it will disappear in the second half.”
It’s now budgeting for full-price sales next year to be anywhere between a 2% fall and a 4% rise.
The better-than-expected full-price sales reflected that profit guidance upgrade now ranging between £718m and £732m. “Where we fall within this range will depend on our sales in January,” it noted.