Next said its full-price sales performed £38m ($48.2m) better than its previous guidance of +2.0% for the nine weeks to 30 December 2023 (Q4).
GlobalData’s lead retail analyst Emily Salter believes the fashion and homeware retailer will provide the retail industry with some “much-needed optimism” due to it outperforming its previous guidance.
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Next pointed out the consumer environment looks “more benign than it has for a number of years,” albeit there are some significant uncertainties.
The UK company added that cost price inflation in its own products is diminishing, mainly as a result of decreasing factory gate prices and stated: “We believe that this will allow us to maintain zero inflation in selling prices, along with a small increase in bought gross margins. This will be the first time in three years that input prices have been stable.”
Next’s online store sales were the driver of its growth with sales rising by 9.1% compared to a more sombre 0.6% increase in store sales, although she noted this is slightly distorted by a much stronger performance by stores in 2022 due to the impacts of the postal strikes.
Manager of quality shares portfolio at the Wealth Club Charlie Huggins believes the online sales reflected “better stock availability and excellent operational execution.”
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By GlobalDataHuggins noted this is in sharp contrast with other retailers such as Superdry, which he said has faced challenges in the current economic environment.
Next stated the Houthi attacks in the Red Sea could cause some stock delivery delays in the early part of the year due to difficulties accessing the Suez Canal.
Richard Lim, CEO at Retail Economics said Next is beginning to see the benefits of its “clever acquisitions” made in recent years, including Reiss and FatFace.
Huggins echoed this and added: “Next’s core proposition is clearly resonating with the UK consumer and is being augmented by intelligent acquisitions of brands like FatFace. With inflation falling and wages rising, the economic picture also looks a lot less bleak than at the start of last year.”
Next expects full-year pre-tax profit to rise 4% to £905m, up from a previous forecast of £885m.
In its statement, the company issued guidance for 2024/25 financial year and expects total group sales including subsidiary companies to increase by 6% and profit before tax by 5%.
