Next shares jump on Christmas sales rise: Online surge offsets woeful performance in stores

Fashion giant Next achieved rising sales over the vital Christmas trading period as a stellar performance online offset tumbling sales at its stores. 

Its shares jumped 6 per cent to £44.26 in early trading, with investors welcoming the positive update after what was a torrid year for many in the retail industry. 

However, the cautious High Street stalwart today lowered its estimate of how much profit it will make this year by £4million to £723million.  

Next said full-price sales rose 1.5 per cent in the run up to Christmas despite a tough November

Next said full-price sales rose 1.5 per cent in the run up to Christmas despite a tough November

Next said full-price sales rose 1.5 per cent in the run up to Christmas despite a tough November

It blamed higher sales of lower margin goods, like personalised gifts and beauty products. It was also stung by higher operational costs online; Next now derives more than half its total sales from the internet.

Next’s full-price sales for the festive period, between the end of October and December 29, rose by 1.5 per cent, which was in line with City expectations. 

The firm said that a busy few weeks ahead of Christmas, and a strong half-term week, made up for a ‘disappointing’ November, during which a number of High Street firms, from Primark to Asos, bemoaned tough trading conditions.  

While Next’s online division surged 15.2 per cent, sales across its more than 500 stores continued to decline – falling 9.2 per cent during the period.  

The retailer warned that its financial year to January 2020 will remain under pressure, predicting profits will fall 1 per cent to £715million.  

It said its outlook comes with a ‘high degree of uncertainty’, however, and does not factor in the ‘potential benefits of a smooth transition or the downsides of a disorderly Brexit’.  

Next’s trading statement is going to ‘rattle the market’, warned Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service.

She said: ‘A full-year profit warning from Next will put the cat among the pigeons in the retail sector as the clothing and homewares brand is widely regarded as a bellwether of middle-England consumer sentiment. 

‘Factor in Next’s warning about the high degree of uncertainty that prevails, and that’s before you even start thinking about Brexit disruption, and you can see how the first real retail Christmas trading statement of the year is going to rattle the market.’  

Next's shares shot up in early trading today after its Christmas results met City expectations

Next's shares shot up in early trading today after its Christmas results met City expectations

Next’s shares shot up in early trading today after its Christmas results met City expectations

But the jury is still out as to whether Next’s glass is ‘half-full or half-empty,’ said Interactive Investor’s head of markets Richard Hunter. 

‘There are certainly signs that the company is managing its affairs tightly, but with the outlook for the sector generally still mired in uncertainty, opinion remains divided and the market consensus of the shares as a hold is likely to remain in place for the time being.’  

AJ Bell investment director Russ Mould said: ‘Retail is currently about survival of the fittest and Next is certainly looking like one of the healthiest in its pack.’ 

Is Brexit stopping shoppers? 

Next boss Lord Simon Wolfson denied that consumers are feeling subdued

Next boss Lord Simon Wolfson denied that consumers are feeling subdued

Next boss Lord Simon Wolfson denied that consumers are feeling subdued

Next boss Lord Simon Wolfson, a vocal supporter of Brexit, has refuted claims that consumer confidence is weak because of uncertainty ahead of the UK’s exit from the EU.

‘People are talking about a subdued consumer, but there’s very little evidence,’ he told the Press Association after today’s Christmas trading update.

‘People are maybe a little bit more cautious given the uncertainties around Brexit, but I think that’s as strong as you can put it,’ Wolfson said.

‘Wages (growth) are now ahead of inflation and employment is strong, so the fundamentals of the consumer economy we don’t think is bad at all,” he added.

He put Next’s ‘very disappointing’ November down to mild weather, and said shoppers splashed out in December instead when colder temperatures set in.

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