Next set to eclipse M&S profits for first time
Analysts say the chain, which runs more than 500 stores in the UK, with a further 200 overseas, easily outperformed rivals over the autumn and festive trading periods.
A stellar Christmas sales performance saw Next up its profit guidance for the second time in just over two months.
It already ranks as the largest clothing retailer in Britain by sales, having overtaken rival Marks & Spencer two years ago. Now its profits are tipped to have exceeded M&S’s for the first time since it was launched in 1982.
Thursday’s results are expected to show that the group earned between £684 million and £700m, up from previous guidance of up to £680m. That would put it comfortably ahead of M&S’s predicted fall in pre-tax profits to £628m.
Next notched up a better-than-expected 11.9 per cent jump in sales from 1 November to Christmas Eve, with takings increasing by 7.7 per cent across its stores and by 21 per cent at the Next Directory mail order and online business.
The firm left most of its rivals in the shade, helped by its long-held policy of not discounting before Christmas.
M&S and a raft of clothing retailers resorted to hefty pre-Christmas discounting, which ate into profit margins.
But Next held firm in the face of competitive conditions and said it went into the January clearance sales with 11.5 per cent less stock to shift after its robust festive sales.
Analysts at brokerage Nomura said the retailer put in “an extraordinary performance in the context of difficult autumn trading for the sector and was driven by areas such as knitwear and sleepwear, which were not as strong for peers”.
They expect sales growth since the critical festive period to have eased back to more “normal levels”, pencilling in around 4.2 per cent for the five weeks to the end of January.
They put its success down to the launch of free next-day delivery for orders placed by 10pm, as well as strong growth in homewares and international online sales.
“However, we think that customers are likely buying from Next at full price because they believe the group’s products offer them good value,” the analysts added.
Next, which is headed by chief executive Lord Wolfson, plans to expand its retail space by 4 per cent during 2014, while also growing its online offering in the UK and overseas. It plans to launch a site in China this year.
Fashion peer Ted Baker is also poised to unveil solid full-year numbers on Thursday after holding its nerve and avoiding heavy price cuts. Retail sales soared 18.3 per cent in the eight weeks to 4 January.