Cold weather saved Christmas for Next

A promotional shot for Next’s Spring 2018 range.Next

• Next’s Christmas sales were up 1.5%, compared to guidance of a 0.3% slump.
• Retailer upgrades full-year profit forecast as a result.
• But Next warns that “challenges” remain and forecasts another fall in annual profits for the year ahead.

LONDON — High Street retailer Next performed better-than-expected over the Christmas period thanks to the UK’s extended period of cold weather, the company said on Wednesday.

Both online and physical stores “experienced an improvement in sales” in the run-up to Christmas, “with our Online business performing particularly well,” Next said in a trading update.

“We believe part of this improvement has been down to much colder weather leading up to Christmas,” the company said.

Sales in the 54 days up to December 24 were up 1.5% compared to the same period a year ago. That’s much better than the 0.3% fall in sales that Next had told investors to expect.Next

Next upgraded its profit forecast for the year by £8 million as a result, telling investors its core forecast is now £725 million for the year to January 2018. This would still represent a slump of 8% compared to the 2016/17 performance.

But while the topline figures are encouraging, an analysis shows continued trouble for Next’s physical stores, which are a bellwether of British High Streets. Sales at its stores fell by 6.1% in the run-up to Christmas and are down by an estimated 7.2% across the entire year. The slump was masked by a 13.6% jump in online sales over the Christmas period.

Next warned: “Many of the challenges we faced last year look set to continue into the year ahead. 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.”

Still, Next forecast a profit for the year to January 2019 at £705 million — meaning it is expecting yet another dip in annual profits. The retailer said this is because it expects “operational costs to continue to grow faster than sales.”