Next shares rose on Tuesday after reporting stronger-than-expected Christmas trading, with full-price sales rising 6.0% in the nine weeks to December 28th, prompting the bellwether retailer to raise its profit guidance for the year.
The British retail giant revealed that its performance was particularly driven by robust online growth, especially from its international operations. Online sales overseas surged by 31.4% during the festive period, while the company’s UK online business, comprising both Next’s own brand and third-party Label brands, grew by 6.1%.
“Next has enjoyed a strong Christmas with its online business seeing an acceleration in sales growth in the fourth quarter, both in the UK and overseas. The year ahead is forecast to be more challenging, but Next still expects to grow sales and profit. It is a classic example of a strong business getting stronger,” said Charlie Huggins, fund manager at Wealth Club.
“Next has pulled another rabbit out of the hat this Christmas, beating its sales forecasts once again. More important for investors is the guidance for the coming year.”
However, the picture was less rosy for Next’s physical stores, where sales declined by 2.1% during the Christmas trading period. This contrast highlights the continuing shift in consumer shopping habits towards digital channels, a trend that has been consistent throughout the year.
The strong overall performance has led Next to increase its profit forecast for the year ending January 2025. The retailer now expects full-year profit before tax to reach £1,010 million, up £5 million from its previous guidance. This would represent a 10.0% increase compared to the previous year.
Next also noted that its end-of-season sale stock was up 13% compared to last year, though the company stated this represents a return to more normal levels after particularly low surplus stock in the previous year. The retailer confirmed that clearance rates are meeting expectations.
Looking ahead to the next financial year, Next has adopted a more cautious stance, forecasting sales growth of 3.5%. The company cited concerns about the impact of employer tax increases on the broader economy, particularly their potential effects on prices and employment levels.
“Calendar year 2025 is likely to be a bloodbath for the UK retail sector,” Huggins said.
“The Autumn Budget means retailers will face a significant increase in employee costs and many will not be able to offset this. Next stands apart for its ability to do so, with its high margins, strong overseas growth and efficiency initiatives all helping it to preserve profitability.”