Advertisement

  1. ITV Report

Next sees festive sales rise, but cuts profit forecast

Fashion chain Next has cut its annual profit forecast and predicted falling earnings over the year ahead despite revealing a solid Christmas Photo: PA

Fashion chain Next has cut its annual profit forecast and predicted falling earnings over the year ahead despite a solid Christmas performance.

The group said full-price sales rose 1.5% between October 28 and December 29, in line with expectations.

It saw high street store sales slump 9.2% over the Christmas trading period, though this was offset by a 15.2% surge online.

But it downgraded its profit forecast to £723 million for the year to January, from the £727m previously expected, and said the next financial year will remain under pressure.

It blamed the gloomier profit outlook for the current year on higher sales of seasonal products, such as personalised gifts and beauty products, which have a lower profit margin than its clothing ranges.

The group also said it faced higher operational costs for online sales.

Shares rose 6% as the group shrugged off fears of a festive sales washout.

For the year to January 2020, Next predicted profits will fall 1% to £715 million while full-price sales growth will ease back to 1.7% from the 3.2% expected for 2018-19.

The group said: “In the year ahead, we are assuming a similar economic environment as that experienced in the second half of the current year.

“Within this guidance, we expect retail sales to be down 8.5% and online sales to be up 11%.”

But it said this came with a “high degree of uncertainty” and does not factor in the “potential benefits of a smooth transition or the downsides of a disorderly Brexit”.

Chief executive Lord Simon Wolfson said November was hit hard by unusually mild weather, but that spending bounced back in December.

Next is the first of the major retailers to report back with festive figures, with the sector’s performance watched closely for signs of a Brexit impact on consumer sentiment.

There have been fears of a difficult season for retailers after Asos issued a pre-Christmas profit warning following a dire November, while music chain HMV became the first high street casualty last week when it appointed KPMG to carry out an administration.

But experts at Shore Capital said Next’s performance was impressive.

Analyst Greg Lawless said: “Given the macro economic environment and difficult clothing market through the autumn, management should be applauded for such a credible trading update.”