Next reports 2.9% growth in pre-Christmas trading

The Next store in Bury St Edmunds.

The Next store in Bury St Edmunds. - Credit: Gregg Brown

Retailer Next cheered the City today with a 2.9% rise in full-price sales in the run-up to Christmas, although it warned it was “very cautious” about the year ahead.

The figure for trading from October 28 to December 24 means Next is on track to outperform its forecast of 1% growth for the quarter to January.

With the firm also announcing a 50p special dividend for shareholders, the update - the first significant retail figures since Christmas - boosted its shares by as much as 4% in early trading and gave a lift to rival Marks & Spencer too.

Next’s announcement revealed that while sales from its stores were ahead by only 0.5%, overall trading was lifted by its Next Directory online and catalogue arm, up 7.5%.

The group said it had gone into its end-of-season sale with “significantly more stock than last year”. It warned in October that it had been hit by the mild autumn weather, which resulted in it lowering profit expectations as it needed to offload goods at a discount.

Following today’s trading update, it said full-year profits should be £775million, £5m higher than at the time of the warning.

Week-by-week figures showed full-price sales struggled in November but picked up in the run-up to Christmas and were ahead by £20m in the final week, though the figure was flattered by the retailer having an extra day’s trading compared to 2013.

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Next said the outlook for UK consumers appeared “relatively benign” with low inflation, wages starting to recover, available credit and strong employment painting “a somewhat more positive picture than recent years”.

But the group said it was “very cautious” for the year ahead as it faced comparisons with a strong spring and summer in 2014 while uncertainty in the UK and global economy - with a general election looming - presented risks.

It is expecting sales growth for 2015/16 of between 2.5% and 7.5%, compared to latest expectations for 2014/15 of 6-8%. For the financial year to date, full-price sales are ahead 7.7%.

Neil Saunders, managing director at retail analysts Conlumino, said: “Next has posted a solid set of numbers, especially so given that they are measured against some tough year-on-year comparatives.”

He added that the retailer’s wary approach to discounting had helped hold up profits while the success of the Next Directory looked in line with the rest of the high street.

“In many ways, the Next figures reflect the wider trend of Christmas, namely that the high street performed reasonably but was saved by online and multichannel which boosted retail sales,” Mr Saunders said.

Cantor Fitzgerald analyst Freddie George said: “There will be relief all around that the trading update was better than expected both in retail and the Directory.”

Retail analyst Nick Bubb said: “Next has managed to allay fears about the impact of the apparent discounting frenzy pre-Xmas on the High Street, delivering solid +2.9% sales growth.”