Management at high street giant Next have welcomed better than anticipated trading over what many feared would be a tough Christmas period.
The business said sales of its full-price items were up almost 5 per cent year-on-year in the nine weeks to December 30 – having previously predicted that trade would be down 2 per cent.
Based on the figures, the Leicestershire-headquartered business said it thought its pre-tax profits for the full year would be £20 million higher than first estimated at £860 million – up 4.5 per cent on the previous year.
However management said they remained cautious about the state of the market during the cost-of-living crisis, expecting revenues for the next 12 months to be down 1.5 per cent on this year at £4.5 billion. Pre-tax profits next year, they believe, could be down 7.6 per cent at £795 million.
In a Christmas trading update the fashion and homewares chain said: “Both online and retail exceeded our full price sales expectations, with retail being particularly strong.
“We think that we underestimated the negative effect Covid was having on our retail sales last year.
“We may have also underestimated the effect improved stock levels would have on both businesses (stock levels were exceptionally low last year as a result of widespread supply chain disruption).”
Sales from physical stores were up 12.5 per cent over Christmas compared to 2021, helped by people shopping for cold weather wear during last month’s cold snap. Online sales were almost level with last year.
Highlighting how weather can shape trade, the business said: “We believe that the strength of demand for cold weather products in December was partly a result of pent-up demand from an unusually warm October and November.”
The business said it was also having a strong end of season clearance sale, partly due to having overstocked in recent months.
It said the coming year would be tougher due to the pressures on people’s spending powers from high energy costs, rising mortgage costs as fixed rate deals end and continued inflation in its own prices – with price rises peaking at 8 per cent during the spring/summer season before inflation gradually slows.
Next was also having to manage higher UK operating costs, mainly as a result of UK wage inflation and its own energy costs.
But it added: “On a more positive note, we expect employment to remain strong so are not anticipating a collapse in demand or any increase in bad debt over and above our current provisions.
“Looking further ahead, it appears likely that the recovery of the pound against the dollar (if it persists) and continuing downward pressure on factory gate prices, means that inflation is likely to be lower again in the spring of 2024.”
