Christmas sales surge helps Next profits to overtake rival M&S

A stellar Christmas sales performance saw Next raise its profit forecast for the second time in just over two months, with the group now expecting earnings for the year to January 25 to surge by up to 12.6 per cent.

It notched up a better-than-expected 11.9 per cent jump in sales from November 1 to Christmas Eve, with sales increasing by 7.7 per cent across its stores and 21 per cent in the Next Directory catalogue and online division.

The group left rivals such as M&S in the shade, helped by its long-held policy of not discounting before Christmas.

M&S and a raft of clothing retailers resorted to hefty pre-Christmas discounting, which damaged profit margins.

But Next held firm in the face of competitive conditions and said it went into the January clearance sales with 11.5 per cent less stock to shift after its robust festive sales.

It expects to earn between £684m and £700m in its full year, up from a previous range of between £650m and £680m.

This puts it on course to make more money than M&S for the first time since it launched in 1982, with M&S predicted to see underlying annual pre-tax profits fall to £628m.

Analysts at Nomura said Next put in “an extraordinary performance in the context of difficult autumn trading for the sector and was driven by areas such as knitwear and sleepwear, which were not as strong for peers”.

They expect sales growth since Christmas to have eased back to more “normal levels”, pencilling in around 4.2 per cent for the five weeks to the end of January.

They put its success down to the launch of free next day delivery for orders placed by 10pm, as well strong growth in homewares and international online sales.

“However, we think that customers are likely buying from Next at full price because they believe the group’s products offer them good value,” they added.

Next, which currently has around 500 stores, plans to expand its retail space by four per cent on a net basis during 2014, while also growing its online offering in the UK and overseas.