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Next raises profit forecast after strong Christmas | Next raises profit forecast after strong Christmas |
(35 minutes later) | |
Retailer Next has reported strong sales for the holiday shopping season. | Retailer Next has reported strong sales for the holiday shopping season. |
Sales rose 11.9% between 1 November and 24 December compared with the same period last year, which the company said was "significantly" beyond its own expectations. | Sales rose 11.9% between 1 November and 24 December compared with the same period last year, which the company said was "significantly" beyond its own expectations. |
As a result, Next is raising its forecast for full-year profits to between £684m and £700m. The company's financial year runs to 25 January. | As a result, Next is raising its forecast for full-year profits to between £684m and £700m. The company's financial year runs to 25 January. |
It is also paying a one-off dividend of 50p, costing the firm £75m. | It is also paying a one-off dividend of 50p, costing the firm £75m. |
Next shares jumped 9% in early trading. | Next shares jumped 9% in early trading. |
Among the Christmas trading updates released so far, Next, John Lewis and House of Fraser have all reported healthy sales. | Among the Christmas trading updates released so far, Next, John Lewis and House of Fraser have all reported healthy sales. |
Debenhams has been the major disappointment. On Tuesday, it warned that profits would be lower than forecast after weak Christmas sales. | Debenhams has been the major disappointment. On Tuesday, it warned that profits would be lower than forecast after weak Christmas sales. |
Outperforming | Outperforming |
Next said it had seen a particular improvement in sales of seasonal knitwear and nightwear. | Next said it had seen a particular improvement in sales of seasonal knitwear and nightwear. |
Sales at its stores rose 7.7%, but like other rivals, it was online sales that really drove growth with a 21% gain between 1 November and 24 December compared with the previous year. | Sales at its stores rose 7.7%, but like other rivals, it was online sales that really drove growth with a 21% gain between 1 November and 24 December compared with the previous year. |
Next has now raised its annual profit guidance twice in six months. Back in October it forecast full-year profits of between £650m and £680m. | Next has now raised its annual profit guidance twice in six months. Back in October it forecast full-year profits of between £650m and £680m. |
Analysts said that Next's strategy of not discounting before Christmas had paid off. | Analysts said that Next's strategy of not discounting before Christmas had paid off. |
"Next's strategy of holding firm on pre-Christmas pricing augurs well for full-year earnings and the business remains one of the sector's outperformers, in stark contrast to some major competitors," said Bryan Roberts from Kantar Retail. | "Next's strategy of holding firm on pre-Christmas pricing augurs well for full-year earnings and the business remains one of the sector's outperformers, in stark contrast to some major competitors," said Bryan Roberts from Kantar Retail. |
Keith Bowman, equity analyst at Hargreaves Lansdown stockbrokers said: "Product selection, with knitwear this time a winner, is first class, whilst the group's early adoption of a bricks and clicks business model continues to server it extremely well - the Directory business has again led the way." | |
Cautious outlook | Cautious outlook |
But Next did make some cautious comments about the broader economy, in particular the lack of wage growth. | But Next did make some cautious comments about the broader economy, in particular the lack of wage growth. |
In its trading update, the retailer said: "The problem of little or no growth in real earnings looks set to persist for some time, and we cannot see any reason to expect a significant increase in total consumer spending in the year ahead. | In its trading update, the retailer said: "The problem of little or no growth in real earnings looks set to persist for some time, and we cannot see any reason to expect a significant increase in total consumer spending in the year ahead. |
"We are also wary that any return to significant economic growth is likely to result in rising interest rates which, in turn, is likely to moderate spending of those with mortgages." | "We are also wary that any return to significant economic growth is likely to result in rising interest rates which, in turn, is likely to moderate spending of those with mortgages." |
The latest update from Next underlines the company's enviable financial position. In the year ahead the retailer expects to generate £300m of surplus cash. | The latest update from Next underlines the company's enviable financial position. In the year ahead the retailer expects to generate £300m of surplus cash. |
It has pledged to return the funds to shareholders, through dividends or share buybacks. | It has pledged to return the funds to shareholders, through dividends or share buybacks. |
The latest 50p per share special dividend will be paid on 3 February to shareholders on the register on 17 January. | The latest 50p per share special dividend will be paid on 3 February to shareholders on the register on 17 January. |