FASHION stalwart Next has shrugged off the headwinds buffeting the high street yet again with a robust festive performance driven by its online and catalogue arm.
The first of the major retailers to report since Christmas, Next posted a near-3 per cent rise in full-price sales yesterday as the group continued its policy of not launching festive season price promotions before Boxing Day. The firm – which overtook rival Marks & Spencer in profitability for the first time earlier this year – further sweetened the news for shareholders by announcing a 50p special dividend.
Lord Wolfson, group chief executive, revealed that while sales from its stores rose only 0.5 per cent between 28 October and Christmas Eve, overall trading was lifted by its Next Directory online and catalogue arm, where sales jumped 7.5 per cent. Over the full financial year to date, Next Directory’s sales have risen a shade under 13 per cent.
One analyst said: “The group’s online arm has been going gangbusters for some time now, and the wider performance again bucks the trend of much of the high street.”
The more successful trading online compared with the bricks-and-mortar business mirrored the most recent weekly update from John Lewis.
However, Next said it had entered its again delayed end-of-season sale with “significantly more stock than last year”.
Wolfson had warned in October that sales had been hit by unseasonally mild autumn weather, which resulted in it lowering full-year profit expectations at that time, as it needed to discount in order to move stock.
However, in yesterday’s trading update the company lifted its profits guidance to £775 million – £5m higher than at the time of the warning.
Week-by-week figures showed that full-price sales struggled in November, but picked up in the Christmas run-up. They were ahead £20m in the final week of the period, although the result was flattered by Next having an extra day’s trading compared with 2013.
The retailer had a mixed message on the outlook for 2015, saying that it was “very cautious” as it faced comparisons with a strong spring and summer in 2014, and there was macro economic uncertainty. However, it added that the outlook for UK consumers looked “relatively benign”, with low inflation, wages starting to recover, and strong employment giving “a somewhat more positive picture than recent years”.
Next said it was expecting sales growth for the 2015/16 financial year of between 2.5 per cent and 7.5 per cent. That compares to latest expectations for the current financial year of growth of 6 to 8 per cent.
Neil Saunders, managing director at retail consultancy Conlumino, said: “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 multi-channel [sales].”
Independent retail analyst Nick Bubb commented: “Next has managed to allay fears about the impact of the apparent discounting frenzy pre-Christmas.”
SUBSCRIBE TO THE SCOTSMAN’S BUSINESS BRIEFING