CLOTHING chain Next is set to see its annual profits overtake those of rival Marks & Spencer for the first time in its history after a bumper Christmas sales performance.
Shares surged to a record high after the high street stalwart said sales jumped by nearly 12 per cent in the seven weeks leading up to 24 December helped by a policy of resisting price-cutting promotions before Christmas.
Next now has a stock market value of more than £9 billion after its shares rose by nearly 50 per cent in the last year, compared with £7.2bn for 130-year-old M&S.
Group pre-tax profits for the year to 25 January are expected to exceed two of last year’s forecasts.
Shareholders will be rewarded with a special dividend of 50p a share at a cost of £75m and the company also outlined a plan for more payouts to investors rather than share buybacks.
Chief executive Simon Wolfson admitted: “We weren’t planning for anything like as good a Christmas as we had.”
Shares rose by just over 10 per cent today to close up 555p at 6,085p.
The festive sales performance, which included growth of more than 20 per cent at the Next Directory internet and catalogue arm, also impressed analysts.
Numis said the figures underlined Next’s status as the “quality sector heavy-weight”, and Keith Bowman at Hargreaves Lansdown said management’s reputation for “reliable consistent delivery remains thoroughly deserved”.
Overall sales in the year to 24 December were up 5 per cent, 1.25 per cent ahead of the top end of guidance issued in October by the firm.
The outcome was in contrast to department store chain Debenhams, which issued a profit warning on Tuesday, blaming pre-Christmas promotional activity by rivals and mild weather which curbed demand for warm winter garments.
That was an ominous sign for its bigger rival M&S, whose rare move to cut prices before Christmas has prompted fears it, too, has suffered poor trading. It is scheduled to update on Thursday.
Alongside Next in the Christmas winners category so far are department store groups John Lewis and House of Fraser, which both posted positive statements this week.
However, Next cautioned investors not to expect a continuation of the level of growth it saw in the run-up to Christmas, predicting sales growth of between 3 and 7 per cent in its 2014-15 financial year.
Wolfson said that although the economy was likely to continue to steadily improve, lack of growth in real earnings looked set to persist and there was no reason to expect a significant increase in consumer spending in 2014.
“We wouldn’t want people to believe that there’s going to be a return to the sort of levels of consumer expenditure growth that there were in the early 2000s,” he said.
Meanwhile, John Lewis’ three Scottish stores were among the chain’s best-performing branches this Christmas,
according to figures out today. Glasgow enjoyed a 20 per cent year-on-year rise in sales in the week ending 28 December, while Edinburgh was up 15.6 per cent and Aberdeen rose 15 per cent.
However, a fresh profit warning from Debenhams earlier this week, which led to the departure of chief financial officer Simon Herrick, showed that some high street retailers remain under pressure.