Next sales boosted by late Christmas surge

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Next has reported a sharp rise in online sales over the Christmas period, while trading at its stores declined.

The retailer said strong sales during the three weeks prior to Christmas and the October half-term holiday had made up for a “disappointing” November.

In a continuation of recent trends, online sales rose 15.2% between 28 October and 29 December from a year earlier, while store sales fell 9.2%.

In total, full-price sales at the retailer were up 1.5% over the period.

The retailer expects an annual profit of £723m, slightly lower than its previous forecast of £727m.

It blamed the lower forecast on strong sales of less profitable items including beauty products and personalised gifts.

The company said it was particularly difficult to forecast how its business would perform this year, due to the uncertainty around the UK’s upcoming departure from the European Union.

“People are maybe a little bit more cautious, given the uncertainties around Brexit. But I think that’s as strong as you can put it,” said Next chief executive Lord Wolfson, a prominent supporter of Brexit.

At the moment, Next assumes economic conditions this year will be the same as the second half of last year and expects store sales to fall 8.5% and online sales to be up 11%.

Next shares rose more than 6% after its trading statement. That follows a near 20% fall in December when investors were rattled by a profit warning from online fashion retailer Asos.

“Next has delivered some Christmas cheer to the retail sector, but only because its online offering is doing so well. Numbers from the high street stores look pretty dire,” said Laith Khalaf, senior analyst at Hargreaves Lansdown.

However, he points out that stores still make an important contribution to Next as half of online sales are picked up in shops.


Analysis:

Dominic O’Connell, Today programme business presenter

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Predictions of a Christmas nightmare for retailers appear to have been wide of the mark – at least judging by the trading update from Next, traditionally the first of the big players to confess how they did at Christmas.

Sales in the three weeks before Christmas were strong, and there was a big shift from High Street to online sales.

Next, thanks in part to long experience with its directories, has always led the High Street pack when it comes to online sales, and it is well placed to benefit from the move to the internet.

It remains to be seen whether next week’s Christmas trading numbers, those from Debenhams and Marks & Spencer will be of particular interest, elicit the same positive response.

Debenhams is seen as the weakest of the big High Street names, with its shares trading at historic lows, while Marks & Spencer is the middle of a wide-ranging restructuring that will see it shed staff and stores.


The update from Next follows strong Christmas trading figures from John Lewis Partnership, which reported an 11% rise in sales in the last week of 2018 compared with a year earlier.

The partnership includes both John Lewis department stores and Waitrose supermarkets.

Attention will now turn to rival retailers Debenhams and Marks and Spencer, which release trading statements next week.

“We think John Lewis and Next will have outperformed thanks to their strong online presence, so we still wouldn’t rule out some bad news from Debenhams or M&S,” said retail analyst Nick Bubb.

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