Business World

Sunday 20 January 2019

Next's festive figures cheer battered UK retail sector

Store-based sales fell by 9pc
Store-based sales fell by 9pc

Rachel Morison

RETAILER Next's shares rose after surprisingly robust Christmas retail figures cheered investors who were fearing the worst after months of gloom in the sector.

Strong sales in the weeks before the Christmas holiday helped make up for disappointing results in November, the UK clothing retailer said yesterday, a result that was better than some analysts anticipated.

At the same time, the company trimmed its estimate for profit in 2019.

Retailers were on edge through the end of last year after online-only retailer Asos cut its sales forecast, and many in the UK discounted heavily ahead of Christmas.

At the end of 2018, Next shares had lost about a third of their value after peaking in June, and its Christmas performance may signal a reprieve for others in the sector - Marks & Spencer and Debenhams - that report later this month.

The shares gained as much as 7.1pc in London, the most intraday since September 25.

Liberum analyst Wayne Brown upgraded the stock to buy from hold. Other retailers also rose, including Marks & Spencer, Debenhams and Sports Direct.

Next reported a 1pc gain in Christmas sales, although it extended the reporting period until after the holiday, muddying any comparison with last year's performance.

For at least the past five years Next has reported Christmas trading to December 24. Much of the gain was online, where sales grew 15pc, while store-based sales declined 9pc.

Next's performance was "excellent" and "admirable", particularly considering how bad November was for the retail sector and the scale of the downgrades for some fashion and clothing peers, according to Liberum's Tom Musson.

Sales in November suffered because of unusually warm weather, but then recovered in the weeks before Christmas, chief executive officer Simon Wolfson said.

"Consumer's not in a bad place," he said in a telephone interview. "Wages are growing and employment is strong."

Now the question is whether Next's sales are representative of the industry.

Fashion sales at the John Lewis Partnership were up 10pc compared to last year, the closely held retailer said last week.

Last year, Next also reported a strong Christmas, but it was followed by dismal reports from some competitors.

Bloomberg

Irish Independent

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