British fashion and homewares retailer Next Plc has raised its full year profit guidance after full-price sales in the key Christmas trading period came in ahead of expectations.
In a trading update today (3 January), the retailer said full price sales in the three months to 28 December rose 5.2% – which was 1.1% ahead of its internal forecast.
For the year to date, full price sales are up 3.9% on last year, prompting the retailer to raise its full year profit guidance by GBP2m to GBP727m (US$951m). This would represent an increase of 0.6% on last year and earnings per share (EPS) growth of 5.4%.
Next attributed its sales growth to a much colder November than last year, and improved stock availability in both its retail stores and online.
Results were helped by a strong performance online, where full-price sales rose 15.3% in the quarter and 12.1% in the year to 28 December. This compares with a decline of 3.9% and 4.6% in full price sales in its retail stores in the quarter and year respectively.
”That Next has managed to drive higher than expected growth in a year characterised by high levels of economic uncertainty is impressive and as retailers report on their Christmas performance over the next few weeks, it is unlikely that others will have fared as well,” notes Emily Salter, retail analyst at GlobalData.
“The high street stalwart reported that stock in its end-of-season sale, including during the Black Friday period, was 2.9% lower than last year and markdown sell-through rates are slightly lower than expected. As many retailers discounted frequently and heavily in 2019, consumers may have hit sale fatigue, making end-of-season sales less appealing,” Salter adds.
She continues: “The decline in sales generated by Next’s stores slowed significantly versus last year, as the retailer cited improved availability, and will have been aided by stronger footfall to retail parks, as its presence in this location will have shielded it from the sharper decline in footfall to town centres.
“Ongoing improvements to its in-store proposition focusing on leisure and service aspects, such as Costa Coffee and Amazon Counter, will have been popular in the lead-up to Christmas, driving footfall to stores.
“Next needs to feature bestselling lines relevant to the local customer base to ensure the more limited ranges in store (versus online) are the most worthwhile lines to stock, highlighting key ranges such as its Emma Willis collection.”
Richard Lim, CEO of Retail Economics, says: “This was an impressive end to the year as their outstanding online business continues to set them apart from the competition. The retailer is benefitting from years of investment in their digital proposition, continually evolving their business model to meet shopper’s heightened expectations.
“There’s no doubt that more Christmas shopping was done online this year than ever before and they have positioned themselves to capitalise on the increasingly complex customer journey. Consumers expect to be able to seamlessly shop across a multitude of physical and digital channels, often at the same time, and the retailer has embraced this new reality.
“It’s also interesting to note that clearance sales were below expectations which are likely to have been disrupted from this year’s timing of Black Friday.”
Freddy Khalastchi, business recovery partner at accountancy firm, Menzies LLP, adds: “Stronger than expected, these post-Christmas results reveal Next’s success in developing a multi-brand, multi-channel proposition. With falling sales and profit margins still defining much of the UK high street, the results are a sign that the retailer is clearly doing something right.”
He also cautions the rise on online sales “is likely the result of the retailer’s strong focus on restructuring its bricks and mortar footprint, and competitors who haven’t taken steps to adapt their business models in a similar way may have a rough time ahead over the coming days and weeks.”
Next will announce results for the full year ending January 2020 on 19 March.