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Next emerges as big Christmas winner with sales up 12% Next emerges as big Christmas winner with sales up 12%
(about 3 hours later)
Britain's second-largest clothing retailer, Next, has emerged as the high street winner over the festive shopping season, with sales "significantly ahead of expectations". Britain's second-largest clothing retailer, Next, is on track to generate bigger profits than rival Marks & Spencer for the first time after seeing a surge in sales in the runup to Christmas.
The shopping group said that strong sales of seasonal jumpers and nightwear had boosted trading in the runup to Christmas, with sales up 12% on last year for the period from 1 November to 24 December. The retailer saw a surge in sales in the last three months of the year, doubling its online growth from the previous quarter and seeing its strongest underlying growth in stores since the summer of 2002, according to analysts at Bernstein. Shares in the retailer jumped nearly 10% to a record £60.80 as the company said strong sales of knitwear, gifts and nightwear and booming internet trade had lifted sales "significantly ahead of expectations". Just 12 months ago, they were changing hands at £39.05.
Raising its pre-tax profit forecast for 2013 by about 4% to a range of £684m to £700m, Next also announced that a special dividend of 50p per share would be paid out in early February to shareholders, at a cost of £75m. It is also planning to distribute a further £300m in 2014 via share buybacks and special dividends. The group shrugged off fears that the festive season had been tough for clothing stores with a 12% rise in sales in the period from 1 November to 24 December compared with the same period a year before.
Shares in Next jumped 10%, taking them to an all-time high of £60.99, later settling at £59.80, a gain on the day of 8%. Next held out against a wave of discounting by rivals in the final trading days before Christmas, but doubled its pace of growth online from the previous quarter and saw its strongest underlying growth in stores since the summer of 2002, according to analysts at Bernstein.
Next's healthy Christmas numbers come after John Lewis and House of Fraser reported a sales surge in the runup to Christmas. Out in the cold is Debenhams, which issued a profits warning and parted company with its finance director after disappointing sales. Attention is now turning to Marks & Spencer, which is due to report next week. Like Debenhams, it slashed prices in a last-minute bid to woo Christmas shoppers, raising fears that the high-street stalwart could miss its profit targets. In light of that storming performance, Next raised its pre-tax profit forecast for 2013 by about 4% to a range of £684m to £700m, putting it well ahead of the City's expectations for its much bigger rival Marks & Spencer , which is currently expected to make an annual profit of £650m.
Analysts said that Next's strict policy of not discounting outside clearly defined sales events was something other retailers should take heed of and had clearly not affected its ability to take market share. Next's stockmarket value climbed to nearly £2bn more than Marks & Spencer as it announced that a special dividend of 50p per share would be paid out to shareholders in early February, at a cost of £75m. The company is planning to distribute a further £300m in 2014 via share buybacks and special dividends.
Neil Saunders at retail analysts Conlumino said:"This is one of the reasons why Next is a festive winner in terms of both sales and profits, guidance on the latter now being at the very top end of market expectations." Next's healthy Christmas numbers come after John Lewis and House of Fraser reported a seasonal sales surge, boosted by stellar performances online.
Simon Wolfson, the chief executive, said Next had performed well partly because of shoppers' growing confidence in ordering online for delivery to homes and stores which helped the company capitalise on a late surge in sales this year. But Wolfson said sales had mainly been lifted because it had got its product right, particularly on womenswear, this winter after a not so sparkling year in 2012. "We had a good season and a lot of ranges were better than the previous year," he said. Out in the cold is Debenhams, which issued a profits warning and parted company with its finance director after disappointing sales.
Wolfson warned that the retailer's strong performance was unlikely to continue in the first half of this year and sounded a warning about confidence among cash-strapped consumers. Attention is now turning to Marks & Spencer, which is due to report next week. Like Debenhams, it slashed prices in a last-minute bid to woo Christmas shoppers, raising fears that the high-street stalwart could also miss its profit targets.
"The consumer hasn't had an awful lot more to spend. Looking forward the environment will be better, just not a lot better," he said. "Although we have seen a return to economic growth and the credit squeeze on consumers is abating, earnings are not keeping up with inflation and so we are not expecting a return to the boom times." A poor Christmas for Marks & Spencer, which reveals its festive trading figures next week, would pile more pressure on chief executive Marc Bolland who is trying to turn around years of poor clothing sales.
Analysts said that Next's strict policy of not discounting until the clearly defined start of its sale on Boxing Day was something other retailers should take heed of and had clearly not affected its ability to take market share.
Neil Saunders at retail analysts Conlumino said: "This is one of the reasons why Next is a festive winner in terms of both sales and profits."
Simon Wolfson, the chief executive, said Next had performed well partly because of shoppers' growing confidence in ordering online for delivery to homes and stores, which helped the company capitalise on a late surge in sales this year.
But he said sales had mainly been lifted because Next had got its ranges right this year, particularly on womenswear, after a not so sparkling year in 2012. "We had a good season and a lot of ranges were better than the previous year," he said.
Wolfson warned that the retailer's strong performance was unlikely to continue in the first half of 2014 and sounded a warning about confidence among cash-strapped consumers.
"The consumer hasn't had an awful lot more to spend. Looking forward, the environment will be better, just not a lot better," he said. "Although we have seen a return to economic growth and the credit squeeze on consumers is abating, earnings are not keeping up with inflation and so we are not expecting a return to the boom times."
On a day when Nationwide revealed that house prices rose by 8.4% in 2013, Next also sounded the alarm over a potential rise in interest rates adding further pressure on household incomes. "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 company said.On a day when Nationwide revealed that house prices rose by 8.4% in 2013, Next also sounded the alarm over a potential rise in interest rates adding further pressure on household incomes. "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 company said.
The City took heart from Next's performance as it awaits a flurry of Christmas trading reports over the coming weeks. Supermarkets Tesco and Sainsbury's and online grocer Ocado will reveal their trading figures next weeks.
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