Next is making a habit of increasing its profit guidance. Strong online sales in the third quarter were the driving force for the most recent upgrade to profits, which are now expected to exceed £1bn for the full year period.
The retailer is proving to be a sales growth juggernaut, with total full-price sales increasing 7.6% between August and October. Next, traditionally known for the queues of people eager for a bargain outside their stores on Boxing Day, are now enjoying the highest sales growth rates in the online arena.
Next’s UK online sales grew 7.9% during the period compared to only 2.9% growth in traditional retail sales.
Investors were clearly pleased with the news, and Next shares were 2% higher at the time of writing. This adds to a sterling run for Next shares this year, which has seen an appreciation of 26% year to date.
“Next extended its hot streak of positive results as profit guidance was nudged higher yet again, just six weeks after the last upgrade,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“The early arrival of cold weather this year is being thanked for helping to deliver better-than-expected full-price sales across September and early October, as consumers scramble to update their winter wardrobe. That tailwind’s expected to continue into the fourth quarter and keep boosting sales.
“Skyrocketing demand in its online channel remains a running theme, but it was pleasing to see retail sales return to growth in the period too. Looking forward, the online channel is likely to remain the main growth driver. It already brings in more than half of the group’s sales, and expansion overseas is still in its infancy. Around 90% of overseas business currently comes from Europe and the Middle East, both of which can be serviced quickly and cheaply from the UK. Given the untapped size of these markets, and increased traction in new markets, there’s a big opportunity if Next can execute its expansion plans well.”
Next will be one of the first retailers to announce festive trading, with sales up to 28th December pencilled in to be released 7th January.