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Headwinds due to ease

Next delivers some Christmas sales sparkle

Next Straiton

Next: upgrading profit guidance

Next, the fashion and homeware chain, offered some post-Christmas cheer to the retail sector by reporting an uplift in full price sales.

In the 54 days up to Christmas Eve sales were up 1.5% on last year, an improvement on its November guidance of a 0.3% fall.

It said its online business performed particularly well. Next said online sales benefited in part to much colder weather leading up to Christmas.

Sales in stores fell by 6.1% but online rose 13.6%.

In a trading update, the company said: “Better than expected full price sales means that we are marginally upgrading our profit guidance.

“Our central guidance for group profit increases by £8m to £725m and our profit guidance range is now £718m to £732m.  Where we fall within this range will depend on our sales in January.

“Many of the challenges we faced last year look set to continue into the year ahead.  Subdued consumer demand driven by a decline in real income, the increase in experiential spending at the expense of clothing, and inflation in our cost prices remain challenges for 2018.

“However, we believe that some of these headwinds will ease as we move through the year; we already know that cost price inflation will reduce to 2% in the first half and believe it will disappear in the second half.

“We are budgeting for full price sales next year to grow by between -2% and +4%.  The mid-point of +1% represents a modest improvement on this year’s anticipated growth of +0.3%.

I”t is very early to be issuing profit guidance for the year ahead, but if sales do grow at +1% we estimate that group profit would be around £705m.  This is marginally down on the current year as we expect operational costs to continue to grow faster than sales.”

Next will announce results for the full year on 23 March.

Comment: Next offers sparkle, but the sector is not yet out of the woods

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