Next upgrades profit forecast after upbeat Christmas

Next kicked off the post-Christmas reporting season with an upbeat statement, flagging higher than expected sales and a slight improvement to its full-year profit forecast.

Full-price sales in the fourth quarter to December 28 were up 5.2 per cent, taking the year-to-date rise to 3.9 per cent. The fashion retailer said this was ahead of its internal forecasts and meant that full-year pre-tax profit would be around £727m, a small increase on the £725m previously indicated.

Sales in the group’s 517 stores fell 3.9 per cent in the fourth quarter, but that was more than offset by a 15 per cent rise in online sales. 

In the equivalent period last year, full-price sales increased 1.5 per cent, with a 6 per cent drop in store sales offset by a 13.6 per cent increase in online ones. It upgraded its profit forecast last year as well. 

The company had previously been cautious with its expectations; at its last trading update two months ago, the company said that it did not expect the strong sales growth reported for October to persist for the rest of the year.

Since then, trading on high streets more generally has been distorted by the timing of Black Friday. This fell a week later than last year and occurred after many consumers‘ November’s payday. Most analysts think this will have pulled spending forward from December, and considered the general election held that month to have been unhelpful for trading. 

The company’s shares rose about 1 per cent in early London trading on Friday.

However, Next said it believed that a prolonged period of chilly weather in November helped sales of winterwear. Its chief executive, Simon Wolfson, has previously said he believes that politics has little effect on people’s day-to-day spending. 

READ  Government offers to set up enclave for Swedish companies

For the year to January 2021, the company said it is was budgeting for full-price sales to rise 3 per cent overall, with profit set to grow by 1 per cent to £734m. “Surplus cash” — what is left after tax, interest, capital spending and ordinary dividends — will be reduced by a change in the timing of corporation tax payments and is expected to be £290m. 

At least half of this will be returned to shareholders through a combination of share buybacks and a special dividend. 

Next shares have risen by three-quarters over the past year, making it the fifth-best performer in the FTSE350 general retail index.



Please enter your comment!
Please enter your name here