Next in surprise retail boost

Shares in Next rose almost 5% yesterday after the fashion retailer reported surprisingly robust Christmas retail figures which cheered investors who were fearing the worst after months of gloom in the UK sector.

Strong sales in the last few weeks helped make up for disappointing results in November, the retailer said, a result that was better than some analysts anticipated.

At the same time, the company trimmed its estimate for 2019 profit.

Retailers were on edge through the end of last year after online-only Asos cut its sales forecast, and many in the UK discounted heavily ahead of Christmas.

At the end of 2018, Next shares had lost about a third of their value after peaking in June, and its Christmas performance may signal a reprieve for others in the sector — M&S and Debenhams — that report later this month.

Other retailers also rose, including Marks & Spencer, Debenhams, and Sports Direct International.

Next reported a 1% gain in Christmas sales, though it extended the reporting period until after Christmas, muddying any comparison with last year’s performance.

For at least the past five years Next has reported Christmas trading to December 24. Much of the gain was online, where sales expanded 15%, while store-based sales declined 9%.

Next’s performance was excellent and admirable, according to broker Liberum.

Sales in November suffered because of unusually warm weather, but then recovered in the weeks before Christmas, chief executive Simon Wolfson said.

“[The UK] consumer’s not in a bad place. Wages are growing and employment is strong,” he said.

"Now the question is whether Next’s sales are representative of the UK industry,” he said.

Fashion sales at the John Lewis Partnership were up 10% against last year, the retailer said last week.

Last year, Next also reported a strong Christmas, only to be followed by dismal reports in the next days from competitors.

Retailers discounted heavily in the days ahead of Christmas, rather than wait for December 26 to kick off sales. Next held back from the price slashing. It has cut its profit forecast for the year to £723m (€802.7m).

Bloomberg


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