NEXT, which has a high-profile store at the £350m Trinity Leeds shopping centre, has emerged among the winners from the festive trading season.
The company, which is Britain’s second-largest clothing retailer, raised its yearly profit outlook on the back of pre-Christmas sales that topped its own forecast.
Shares in the company, which are up 47 per cent over the last year, rose again to a record high after it said total sales rose 11.9 per cent in the November 1 to December 24 period, helped by its policy of not holding sales pre-Christmas.
Sales in the year to December 24 were up 5.0 per cent, 1.25 per cent ahead of the top end of guidance issued in October.
Next’s performance stands in stark contrast with Debenhams, which issued a profit warning on Tuesday, blaming the highly promotional pre-Christmas environment and mild weather, which curbed demand for warm winter garments. Alongside Next in the winners category so far are department store groups John Lewis and House of Fraser, which both posted positive statements on Thursday.
However, Next cautioned investors not to expect a continuation of the level of growth it saw in the run-up to Christmas, predicting sales growth of between three and seven per cent in its 2014-15 financial year.
Chief executive Lord Wolfson said that, although the economy was likely to continue to steadily improve, lack of growth in real earnings looked set to persist and there was no reason to expect a significant increase in consumer spending in 2014.
“We wouldn’t want people to believe that there’s going to be a return to the sort of levels of consumer expenditure growth that there were in the early 2000s,” he said.
Lord Wolfson also cautioned that a return to economic growth was likely to result in higher interest rates which, in turn, was likely to moderate the spending of those with mortgages.
The outlook for UK consumer spending may become clearer next week when Tesco, Britain’s biggest retailer, and J Sainsbury, also issue trading statements.
Next attributed its encouraging performance to improvements in its seasonal knitwear, nightwear and gift offers.
It also said that increased confidence in online deliveries meant more customers continued to trade via the Next Directory internet and catalogue business right up to the weekend before Christmas.
“We weren’t planning for anything like as good a Christmas as we had,” said Lord Wolfson.
Next Directory sales soared 21 per cent, while sales at the group’s more than 500 stores in Britain and Ireland – and about 200 stores in more than 30 countries overseas – increased 7.7 per cent.
The firm now expects a pre-tax profit of between £684m and £700m in the year to end-January 2014, ahead of previous guidance of £650m to £680m.
Next offered cheer for investors as it said it would pay out £75m in special dividends worth 50p a share and return a further £300m to shareholders over the year ahead following its bumper year so far.
Analyst Freddie George at brokerage Cantor Fitzgerald raised his 2013-14 pretax profit forecast by £29m to £695m, made similar revisions to subsequent years and upgraded his recommendation to “buy” from “hold”.
Keith Bowman, equity analyst at Hargreaves Lansdown Stockbrokers, said Next investors were being “rewarded” once more, following a gain of more than 45 per cent in the retailer’s share price in the last year alone.
He said: “Management’s reputation for reliable, consistent delivery remains thoroughly deserved.
“Product selection, with knitwear this time a winner, is first class, whilst the group’s early adoption of a bricks and clicks business model continues to serve it extremely well – the Directory business has again led the way.”
Next did not provide a regional breakdown for its results.
In September last year, Lord Wolfson warned of a “profoundly anti-growth culture” pervading British institutional life when he addressed the Sheffield Chamber of Commerce dinner. His company wanted to develop a £10m home and garden store at Meadowhall, but the council rejected the application for planning permission on the grounds of harm to city centre trade. The retailer won after appealing to the Government planning inspector.
In his speech, Lord Wolfson said the new Next store at the Trinity Leeds development would take £15m, compared to the £1.5m at the Sheffield city centre store.
Next also has a distribution centre in South Elmsall.