19 July 2024, 07:34
By Furniture News Jan 05, 2023

Next exceeds expectations over Christmas period

In a newly released statement, Next says that sales in the Christmas period proved better than anticipated.

In the nine weeks to 30th December, full-price sales were up +4.8% YoY (some £66m better than the retailer's previous guidance of -2% for the period).   

Both online and in-store sales exceeded expectations (the latter up an impressive +12.5% in Q4).

Accordingly, Next has increased its full-year profit before tax guidance by £20m to £860m (up +4.5% YoY).

However, the retailer says it remains cautious in its outlook for the year ahead: "Initial guidance for the year ending January 2024 is for full-price sales to be down -1.5%, and profit before tax to be £795m, down -7.6% versus the current year."

Next says several factors threaten to dampen demand, including inflation in essential goods (particularly energy), rising mortgage costs as consumers' fixed interest rate deals expire, and continued price inflation in its own products – yet with employment set to remain strong, the retailer does not anticipate a drop-off in demand.

The sales reported in the statement exclude those made by Joules, in which Next acquired a 74% equity stake in November.

Commenting on the trading statement and guidance, Julie Palmer, a partner at corporate restructuring specialist Begbies Traynor, says: “Under-promising and over-delivering has become a hallmark of Next, and the retailer has once again exceeded expectations with its Christmas trading.

“Headed by retail guru Lord Wolfson, the company has reputation as a bellwether of what’s really going on in the economy. Its sometimes cautious forecasts are one of the most reliable guides to the future.

“Next said that when sales shot up starting in early December, it wasn’t down to customers forgetting the cost of living crisis and splashing out on presents. Instead, it was the cold snap that sent them searching for warm clothes, having not bought winter kit during the abnormally warm autumn. This drove sales higher over Christmas, rather than falling as initially predicted.

“Perhaps what is most interesting is the high street giant firing a warning shot at any who might criticise it for talking down the economy. The update said current guidance is now ‘almost exactly’ what it predicted a year ago, adding that back then ‘many considered it to be overly cautious, it now appears very realistic’ [see related].

“With typical understatement, Next said it ‘only mentions this because we are concerned some might look at our forecast for 2023 and again assume we are being over-cautious’.

“Judging by Lord Wolfson’s track record, it would be foolish to ignore this polite warning, especially coming from one of the high street’s most reliable performers and one with the scale to withstand what is likely to be a horrendous post-Christmas trading environment.

“Consumers battening down the hatches in the face of high inflation and energy bills, combined with an almost certain recession, may mean that Next ends up even stronger as tough times on the high street weaken some of its rivals.”

© 2013 - 2024 Gearing Media Group Ltd. All Rights Reserved.