Next ups its profit forecast

Next nudged its full-year profit forecast higher after an increase in sales over the Christmas period was supplemented by improved margins due to a renewed attack on costs.

Shares in Next, which has a long-standing policy of never going on sale before Dec 26, rose 2.3% yesterday, topping the Ftse 100 leader board, after it forecast profit growth in both the 2012/13 and 2013/14 years.

With Britain facing a possible triple-dip recession, many retailers have been finding the going tough as consumers fret over job security and a squeeze on incomes.

“I think it is getting slowly better in that the difference between inflation and wages is narrowing and I think will probably continue to narrow,” CEO Simon Wolfson said.

“But certainly for the rest of 2013 I still think real incomes will drop, albeit at probably a lower rate than they fell last year.”

Next has generally defied the economic gloom, helped by its strong online offer, a constant stream of new store openings and diversification into homewares and overseas markets.

Kicking off the post- Christmas retail reporting season for listed companies, Next said sales, excluding Vat sales tax, rose 3.9% in the Nov 1 to Dec 24 period. That compared with an increase of 2.7% in its third quarter, giving a year to date rise of 3.9%.

Sales at Next’s over 500 stores in Britain and Ireland rose 0.8% in the November, December period while sales at the Directory home shopping, internet and catalogue business increased 11.2%.

Although sales were in line with expectations, cost control measures, markdowns and gross margins were all slightly better than expected, the firm said.

Wolfson said a host of costs, such as in ware-housing, distribution, and store operations, had come in below budget.

Further cost savings have been identified for the 2013/14 year.

Next now expects a year to the end of Jan 2013 pretax profit of £611m (€753m) — £625m, up from previous guidance of £590-£620m.