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Next reports better than expected Christmas sales, driven by a return to stores

Next has become one of the first major retailers to report on sales in Q4 and offers up some good news. In the nine weeks to 30 December full price sales were up +4.8% versus 2021.  This was £66m better than previous guidance of -2.0% for the period.  Full year profit before tax guidance  also rose by £20m to £860m, up +4.5% versus last year  

Online sales grew by just 0.2% YoY for Q4, however retail sales were up more than 12%. 

However, the retailer warns that the better than expected results may be down to under-estimating the impact of Covid on retail sales. In a statement, the company said: “Both Online and Retail exceeded our full price sales expectations, with Retail being particularly strong.  We think that we underestimated the negative effect COVID was having on our Retail sales last year.  We may have also underestimated the effect improved stock levels would have on both businesses.”

Commenting on Next Trading update, Richard Lim, CEO, Retail Economics said: “These results are all the more impressive given the harsh squeeze on household finances. Store sales were particularly strong with shoppers opting to head back into physical locations to seek out the best deals and keep a tighter grip on their budgets.

“Costly online deliveries, being charged for returns and the uncertainty of whether online orders would be received in time because of strike action played into the hands of omnichannel retailers. Next’s best-in-class proposition was well-positioned to benefit from this disruption as they leveraged the value across their joined-up physical and digital platforms, providing an array of options for customers. 

“However, the outlook remains tough. The combination of rising mortgage costs, spiralling energy bills and ongoing inflation across staples will hit discretionary spending throughout 2023. This recessionary backdrop set against rising operating and input costs for retailers is going to hit profits hard for large swathes of the industry.” 

Russell Pointon, Director of Consumer at Edison Group adds: “Today’s update from Next, one of the first retailers of note to update on Christmas trading, has shown better than expected results for the fashion giant. With full-price sales up 4.8 per cent in the nine weeks to December 30, the company showed a marked improvement on its own prediction of a 2 per cent fall. The positive figures are undoubtedly aided by their comparison to last year’s Covid-19-affected results, at a time when supply shortages were being felt most keenly. The better than expected sales performance has led to management increasing its profit expectation, by £20mn to £860mn.

“Management is adopting a cautious outlook for the coming year with an expected small decline in sales and profit expected of £795mn, a fall of 7.6% from this year’s expected outturn.”

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