Next sales rise: here's what the City thinks

Next reported an encouraging 5 per cent sales surge for October. Picture: Next plc
Next reported an encouraging 5 per cent sales surge for October. Picture: Next plc
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Next has bucked the dreary retail backdrop with a steady rise in sales as the high street bellwether’s online takings continued to surge.

Releasing a trading update, the fashion stalwart said overall sales in the three months to 26 October rose 2 per cent compared with the same period a year ago, with online sales up almost 10 per cent although sales in stores slipped 6.3 per cent.

The retailer is one of the most familiar names on UK high streets. Picture: Contributed

The retailer is one of the most familiar names on UK high streets. Picture: Contributed

Next, which is known for providing month-by-month details of sales, revealed that August was particularly weak – up just 0.2 per cent – due to a strong July when sales grew 6.8 per cent.

September was also a struggle, the group noted, with sales growth of 1 per cent. However, this was offset by a 5 per cent surge in October.

The firm told investors: “Sales in September were adversely affected by unusually warm weather and we saw a significant improvement in October when temperatures fell.

“We believe the improved sales growth in October recouped some of the lost sales in September and we do not expect sales growth for the rest of the year to be as strong as October.”

For the year to date, stores sales have fallen 4.8 per cent but online is up 11.1 per cent, taking the overall sales gain to 3.5 per cent.

Election

The group made no comment about the forthcoming general election and what impact it might have on Christmas sales.

However, pro-Brexit chief executive Lord Wolfson has been sanguine on the impacts of the ongoing political drama.

Shares in Next fell more than 2 per cent in pre-lunch trading on Wednesday.

Arlene Ewing, investment manager at wealth firm Brewin Dolphin, said: “Next has bucked the dreary retail outlook with another resilient update. The bricks-and-mortar offering might be in decline, but the online business is delivering solid growth, along with its financing division.

“Increasing numbers of third-party brands want to use its directory and logistics businesses, while its customer service levels remain high. Although Next has been relatively cool on its expectations for the remainder of the year after a particularly strong October, the business appears to be in a very good place.”

Bellwether

Analysts at Shore Capital noted: “Retail bellwether Next has delivered another solid trading update. Next remains a well-managed company with tight cost and stock control, a clear well-executed strategy and an experienced management team.”

Richard Lim, chief executive of Retail Economics, warned: “The wider market remains under pressure and news of a general election just before Christmas couldn’t come at a worse time for retailers.

“Ongoing Brexit uncertainty and hostile political wrangling will further undermine consumer confidence.”

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: "Third quarter numbers show online and in-store sales felt the chill from unusually warm weather in September.

"But look a bit deeper and things seem a lot brighter. Trading in October was far stronger, as the weather cooled down and demand for Next’s autumn/winter collection picked up. That’s particularly encouraging because it suggests there’s genuine appetite for the current collection – there’s little Next can do about a balmy start to the season, but to see positive trends once the mercury drops suggests Next is doing things right.

"Some will be disappointed Next didn’t upgrade guidance on the back of today’s results. But this seems a sensible move. October’s stellar sales were likely a result of people putting off shopping for their winter-woollies in September, so it isn’t reasonable to expect this exaggerated level of sales growth to continue for the rest of the year.

"Of course, wider conditions on the high street remain a challenge. The continued dip of in-store sales at Next are testament to that.

"Given the tough climate, Next can’t afford to take its foot off the gas, but today’s results back up the theory that the group’s one of the better run retailers on the high street."

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