Next shares rose on Tuesday after the retailer announced a solid Christmas trading period driven by online and overseas sales.
The market has become accustomed to strong results from Next, but that does not make their festive trading period any less commendable.
Shares in the retailer were 3% higher after announcing a 10.6% increase in full-year sales and issuing profit before tax guidance of
“Next has revealed it had a very merry Christmas. The high-street stalwart reported stronger-than-expected Christmas trading, with full-price sales up 10.6% in the nine weeks to 27 December,” said Garry White, Chief Investment Commentator at Charles Stanley.
“This is ahead of (albeit usually conservative) guidance of 7% and has resulted in management upping its expectations for full-year pre-tax profits by £15m to £1.150bn. Profits exceeded £1bn for the first time in Next’s last financial year, making it only the fourth UK retailer to hit this milestone after Tesco, Kingfisher and Marks & Spencer. Guidance for the next financial year to the end of January 2027 is for sales and profits to be up 4.5%. As usual, this is likely to be conservative.”
Although Next is traditionally known for Boxing Day queues across the UK, the changing behaviour of the consumer and Next’s strategy to attack digital channels mean the group is now driven by online sales and a notable increase in overseas sales.
“Unwrapping some of the headline figures, sales growth continues to be driven by its online channel, which already accounts for more than half of group sales,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“Within that, overseas sales have continued to grow at an eyewatering pace, up 38.3% over the festive period, helping to buoy the more sluggish growth of just 1.4% in its retail stores.”
“Next also gave a sneak peek into its outlook for the new financial year, with pre-tax profits forecast to grow by 4.5% to around £1.2bn.
“The slowdown comes as this year’s numbers have benefitted heavily from both favourable summer weather and major disruption at M&S. But with Next’s track record of under-promising and over-delivering, this growth target looks a touch conservative. Next remains one of the brightest sparks in the UK retail scene, and there’s potential for more success if it can continue nailing its overseas expansion.”