Next shares climb 5% to new record level on better-than-expected fashion sales

Next expects delays of two to two and a half weeks on deliveries due to attacks on shipping in the Red Sea.

Shares in clothing retailer Next rose by over 5% after it raised its profit forecast for the financial year for the fifth time in eight months as it reported a better-than-expected rise in Christmas sales.

The group, which trades from about 460 stores in Britain and Ireland and has an online presence in over 70 countries, did, however, caution that difficulties with access to the Suez Canal, if they continued, were likely to cause some delays to stock deliveries in the early part of the year and could moderate sales growth.

Next is often considered a useful gauge of how consumers in Britain, in particular, are faring.

British households have been hit by a rise in borrowing costs which stand at a 15-year high and by rapid inflation which dropped below 4% in the latest data but has outpaced growth in wages for much of the past two years. Despite that, Next said full-price sales rose 5.7% in the nine weeks to the end of December. 

Sales in stores rose 0.6% year-on-year, while online sales were up 9.1%, benefiting from service improvements. Shares in Next ended 5.25% higher in the trading session in London. 

Its performance contrasted with sportswear retailer JD Sports Fashion which lowered its full-year profit forecast, citing higher costs and subdued consumer spending in the peak season.

Next said it now expected pre-tax profit before exceptional items for the year to January 2024 of £905m, above previous guidance of £885m and the £870.4m it made in 2022/23 financial year.

The group also gave guidance for its 2024/25 year, forecasting a rise in full-price sales up 2.5%, total group sales up 6% and profit up 5% to £960m.

"On the face of it, the consumer environment looks more benign than it has for a number of years, albeit there are some significant uncertainties," Next said.

It said positive factors were wages now rising faster than prices and zero inflation in its selling prices for the spring/summer season. However, risk factors were a weakening employment market, the expiration of consumers' fixed-rate mortgages and supply chain risks. 

Reuters. Additional reporting Irish Examiner