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.

Sport
Laura Trott with her gold
Commonwealth GamesJust 48 hours earlier cyclist was under the care of a doctor
Life and Style
Upright, everything’s all right (to a point): remaining on one’s feet has its health benefits – though in moderation
HealthIf sitting is bad for your health, what happens when you stay on your feet for a whole month?
Arts and Entertainment
Peter Griffin holds forth in The Simpsons Family Guy crossover episode
arts + ents
News
Orville and Keith Harris. He covered up his condition by getting people to read out scripts to him
People
PROMOTED VIDEO
Sport
France striker Loic Remy
sportThe QPR striker flew to Boston earlier in the week to complete deal
Arts and Entertainment
Gal Gadot as Wonder Woman
arts + entsFilmmaker posted a picture of Israeli actress Gal Gadot on Twitter
Sport
Vincenzo Nibali rides into Paris on the final stage of the 2014 Tour de France
Tour de FranceVincenzo Nibali is first Italian winner since Marco Pantani in 1998
News
Bryan had a bracelet given to him by his late father stolen during the raid
people
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
arts + ents
Arts and Entertainment
Pedro Pascal gives a weird look at the camera in the blooper reel
arts + entsPrince Oberyn nearly sets himself on fire with a flaming torch
News
Danny Nickerson, 6, has received 15,000 cards and presents from well-wishers around the world
newsDanny loves to see his name on paper, so his mother put out a request for cards - it went viral
Arts and Entertainment
Zoe Saldana stars in this summer's big hope Guardians of the Galaxy
filmHollywood's summer blockbusters are no longer money-spinners
Sport
Red Bull Racing's Australian driver Daniel Ricciardo (C) celebrates with Scuderia Ferrari's Spanish driver Fernando Alonso (L) and Mercedes' British driver Lewis Hamilton
sport
Arts and Entertainment
comedy
Arts and Entertainment
Public vote: Art Everywhere poster in a bus shelter featuring John Hoyland
art
Arts and Entertainment
Judd Apatow’s make-it-up-as-you-go-along approach is ideal for comedies about stoners and slackers slouching towards adulthood
filmComedy was dominated by the romcom at its most insufferable
Sport
Tour de France competitor Bartosz Huzarski’s legs have highlighted the gruelling nature of the race, after he posted a picture on Facebook showing extremely prominent veins stretching from his feet and all the way up his legs
Commonwealth Games
Life and Style
Elle Kaye demonstrates the art of taxidermy
food + drinkFood revolution taken a step further in new ‘edible taxidermy’ class
News
A rub on the tummy sprang Casey back to life
video
Sport
Halsall broke her personal best in the 50m butterfly
Commonwealth GamesEnglish swimmer is reborn after disastrous time at London 2012
Arts and Entertainment
O'Shaughnessy pictured at the Unicorn Theatre in London
tvFiona O'Shaughnessy explains where she ends and her strange and wonderful character begins
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
Workers in Seattle are paid 100 times as much as workers in Bangladesh
fashionSeattle company lets customers create their own clothes, then click 'buy' and wait for delivery
Arts and Entertainment
Red Bastard: Where self-realisation is delivered through monstrous clowning and audience interaction
comedy
Arts and Entertainment
booksForget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Voices
The Express offices in the 1930s when writers (such as Orwell) were paid around £2 weekly
voicesWebsites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Life and Style
A cut above: Katy Guest at The Ginger Pig
food + drinkThe Ginger Pig's hands-on approach to primary cuts
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

Application Support Analyst / Junior SQL Server DBA

£40000 - £45000 per annum: Ashdown Group: An established professional services...

Senior Risk Manager - Banking - London - £650

£600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

The benefits of being in Recruitment at SThree...

£18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

Test Analyst - UAT - Credit Risk

£280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

Day In a Page

A new Russian revolution: Cracks start to appear in Putin’s Kremlin power bloc

A new Russian revolution

Cracks start to appear in Putin’s Kremlin power bloc
Eugene de Kock: Apartheid’s sadistic killer that his country cannot forgive

Apartheid’s sadistic killer that his country cannot forgive

The debate rages in South Africa over whether Eugene de Kock should ever be released from jail
Standing my ground: If sitting is bad for your health, what happens when you stay on your feet for a whole month?

Standing my ground

If sitting is bad for your health, what happens when you stay on your feet for a whole month?
Commonwealth Games 2014: Dai Greene prays for chance to rebuild after injury agony

Greene prays for chance to rebuild after injury agony

Welsh hurdler was World, European and Commonwealth champion, but then the injuries crept in
Israel-Gaza conflict: Secret report helps Israelis to hide facts

Patrick Cockburn: Secret report helps Israel to hide facts

The slickness of Israel's spokesmen is rooted in directions set down by pollster Frank Luntz
The man who dared to go on holiday

The man who dared to go on holiday

New York's mayor has taken a vacation - in a nation that has still to enforce paid leave, it caused quite a stir, reports Rupert Cornwell
Best comedians: How the professionals go about their funny business, from Sarah Millican to Marcus Brigstocke

Best comedians: How the professionals go about their funny business

For all those wanting to know how stand-ups keep standing, here are some of the best moments
The Guest List 2014: Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks

The Guest List 2014

Forget the Man Booker longlist, Literary Editor Katy Guest offers her alternative picks
Jokes on Hollywood: 'With comedy film audiences shrinking, it’s time to move on'

Jokes on Hollywood

With comedy film audiences shrinking, it’s time to move on
It's the best of British art... but not all is on display

It's the best of British art... but not all is on display

Voted for by the British public, the artworks on Art Everywhere posters may be the only place where they can be seen
Critic claims 'I was the inspiration for Blanche DuBois'

Critic claims 'I was the inspiration for Blanche DuBois'

Blanche Marvin reveals how Tennessee Williams used her name and an off-the-cuff remark to create an iconic character
Sometimes it's hard to be a literary novelist

Sometimes it's hard to be a literary novelist

Websites offering your ebooks for nothing is only the latest disrespect the modern writer is subjected to, says DJ Taylor
Edinburgh Fringe 2014: The comedy highlights, from Bridget Christie to Jack Dee

Edinburgh Fringe 2014

The comedy highlights, from Bridget Christie to Jack Dee
Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

Dame Jenny Abramsky: 'We have to rethink. If not, museums and parks will close'

The woman stepping down as chair of the Heritage Lottery Fund is worried