Next bolsters hopes for high street sales with a festive leap

Profits guidance is raised after a fillip from online business and shares go soaring

The fashion chain Next today raised hopes for a modest improvement in high street trading conditions this year after it posted a robust performance over Christmas and raised its profit guidance.

The stand-out performer was its Next Directory online business, which posted double-digit sales growth, and the update sent shares in the retailer soaring to an all-time high.

Next's internet and catalogue sales were better than the City had expected and followed John Lewis, the department store chain, delivering barnstorming underlying sales up by 13 per cent over the festive period.

Marks & Spencer, Debenhams, JD Sports Fashion, Tesco and Sainsbury's, among others, will provide a clearer picture of Christmas trading next week. While most are expected to have held their own, Morrisons appears to have had a Christmas to forget, with joint house broker Jefferies forecasting a 2.8 per cent fall in underlying sales at the grocer.

Lord Wolfson, the chief executive of Next, said: "I don't think there will be any dramatic change in the consumer environment in the year ahead."

But crucially, he expects the pressure on household budgets to ease in 2013, as the gap between wage growth, which has been running at an anaemic 1.7 per cent, and wider inflation narrows further. Lord Wolfson forecasts a "slow recovery in real wages" this year that will give shoppers slightly more spending power.

Next ticked up its profit forecast for the year that ends this month to between £611m and £625m, which would be 7.1 per cent to 9.6 per cent ahead of the previous year. Its earlier guidance had been between £590m and £620m for 2012-13. Next's shares added 101p, or more than 2 per cent, to 3,873p.

The key drivers were "slightly better-than-expected" cost control and an improvement in markdowns and margins, driven by it carrying 8.2 per cent less stock into its clearance sale that started on Boxing Day. Lord Wolfson said: "Our clearance rates were ahead of last year." Similarly to previous years, shoppers started queuing outside its Milton Keynes store at 1am on 26 December ahead of a 6am opening, while its store in Manchester's Arndale centre was also packed.

Boosted by new stores, Next grew its retail sales by 0.8 per cent between 1 November and Christmas Eve. Analysts at Espirito Santo said this represented a 1.4 per cent fall in like-for-like sales. While the retailer's trading in stores was in line with City expectations, the 11.2 per cent surge in sales at Next Directory was streets ahead.

Joseph Robinson, a senior consultant at Conlumino, the retail consultancy, said: "Next's performance underlines the trend of this festive season: namely that online has been the principal driver of growth and is paying dividends for those players that have invested in their online offer."

He added: "Next is a very accomplished player in both the internet and multichannel arena and recent service improvements, such as extending order cut-off times for next-day delivery to 9pm, were heavily featured in festive advertising and have subsequently helped to drive online sales."

While many had tipped 3 December, dubbed Mega Monday by the PR industry, to be the busiest online shopping day, Lord Wolfson said it came later. "This is about people having more confidence that the things they want before Christmas will be delivered on time."

Total sales at Next, which has nearly 200 stores in more than 30 countries overseas, rose by 3.9 per cent over the eight weeks. The group plans to open a similar amount of new space – 250,000 square feet – in 2013 to last year.

Next tricks: How retailer racks up success

1. Next Directory

The 25-year-old catalogue and online business continues to power ahead, driven by the breadth of its offer and slick delivery operation. Next Directory alone delivered operating profit of £262.6m in 2011-12, which was more than Waitrose.

2. Management stability

Chief executive Lord Wolfson, product director Christos Angelides, finance chief David Keens and property boss Andrew Varley have been at the retailer for more than 20 years.

3. New formats

The chain has introduced successful fresh formats, notably Next Home, which has 40 shops. While it has only a few combined home and garden centres, it sees the potential for 19 Next Home and Garden shops.

4. Cost management

A key reason for its latest profit upgrade was a series of cost-control measures, such as improved markdown activity.

5. Share buybacks

Next has continued to drive growth in earnings per share, and thereby dividends, by buying back its shares.

6. Product

While some snobs may scoff at the fashionability of its clothing and homewares offerings, no retailer can prosper if it doesn't give customers what they want at the right price. Next's performance points to it continually evolving its range.

Start your day with The Independent, sign up for daily news emails
Sport
sportWWE latest including Sting vs Triple H, Brock Lesnar vs Roman Reigns and The Undertaker vs Bray Wyatt
Arts and Entertainment
Louis Theroux: By Reason of Insanity takes him behind the bars again
tvBy Reason of Insanity, TV review
Arts and Entertainment
Cassetteboy's latest video is called Emperor's New Clothes rap
videoThe political parody genius duo strike again with new video
Arts and Entertainment
tvPoldark, TV review
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Retirement Coordinator - Financial Services

Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

Recruitment Genius: Annuities / Pensions Administrator

Negotiable: Recruitment Genius: You will be the first point of contact for all...

Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

£18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

Ashdown Group: Learning and Development Programme Manager

£35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat
Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

Saudi airstrikes are fuelling the Gulf's fire

Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

The only direction Zayn could go

We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

Spells like teen spirit

A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

If fashion is a cycle, this young man knows just how to ride it

British designer Jonathan Anderson is putting his stamp on venerable house Loewe
Number plates scheme could provide a licence to offend in the land of the free

Licence to offend in the land of the free

Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

From farm to fork in Cornwall

One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
Robert Parker interview: The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes

Robert Parker interview

The world's top wine critic on tasting 10,000 bottles a year, absurd drinking notes and New World wannabes
Don't believe the stereotype - or should you?

Don't believe the stereotype - or should you?

We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, says DJ Taylor
How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

How to make your own Easter egg

Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

Bill Granger's twist on Easter Sunday lunch

Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
Joe Marler: 'It's the way I think the game should be played'

Joe Marler: 'It's the way I think the game should be played'

The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

Cricket World Cup 2015

Has the success of the tournament spelt the end for Test matches?
The Last Word: Justin Gatlin knows the price of everything, the value of nothing

Michael Calvin's Last Word

Justin Gatlin knows the price of everything, the value of nothing