Next upgrades profit forecast after better than expected Christmas sales

Although sales in retail stores dropped by 6.1%, online sales were up 13.6%. Next said the improvement was partly due to the colder weather in the run-up to Christmas.

The overall increase meant that stock for Next’s end-of-season sale, including the stock put into its Black Friday event, was down 6% on last year. The retailer said clearance rates are in line with expectations and are consistent with the profit guidance given in November.

The better than expected full price sales has led Next to marginally upgrade its profit guidance for the current year. Its central guidance for group profit has increased by £8 million to £725 million and its profit guidance range is now £718 million to £732 million.

Looking ahead, Next said many of the challenges it faced last year look set to continue into the year ahead.

In a statement, the company said: “Subdued consumer demand driven by a decline in real income, the increase in experiential spending at the expense of clothing, and inflation in our cost prices remain challenges for 2018. However, we believe that some of these headwinds will ease as we move through the year; we already know that cost price inflation will reduce to 2% in the first half and believe it will disappear in the second half.”

Next is expecting full price sales growth to improve next year with a preliminary estimate of an uplift of 1%. This represents a modest improvement on this year's anticipated growth of 0.3%.

If sales did grow at 1%, Next is estimating that group profit will be around £705 million. It said: “This is marginally down on the current year as we expect operational costs to continue to grow faster than sales.”

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