On Thursday, retailer Next shares jumped almost 4% on the update 2024 profit before tax guidance, which was upped 4% due to better-than-expected festive season sales.
The fifth update to Next’s 2024 forecast was triggered by the news of the brand’s total sales experiencing a 5.7% surge during the 9 weeks ending on December 30, surpassing the initial projection of a 2% increase.
The profit before tax forecast for the fiscal year 2024 was raised by £20 million to £905 million.
Additionally, the company has provided full-year guidance for fiscal year 2025, anticipating a 6% growth in total sales and a 5% increase in profit before tax.
All of this can help explain “why the shares are reaching new peaks, too, especially as management expects further progress to £941 million in fiscal 2025, including £19 million in brand amortisation costs, which will be excluded from headline profit forecasts and figures going forward,” said Russ Mould, investment director at AJ Bell.
Next’s online sales were especially robust, “reflecting better stock availability and excellent operational execution,” said Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club.
“This stands in stark contrast to other retailers like Superdry, which have struggled in the prevailing economic environment,” he added.
Overall, the positive figures “are a further reminder, as if one were needed, that retailers can thrive, regardless of what the weather does, if they sell the right product at the right price point in the right format for the target customer base. Doing this correctly will improve stock turn and sell through, reduce the need to discount, and in turn help profit margins and cash flow,” once again said Russ Mould.
What is clear here is that “UK consumer spending appears to have defied gravity. A strong employment market and rising wages have helped cushion inflationary cost pressures, meaning consumers have continued to fill their Christmas stockings with Next’s wares, despite the gloomy economic headlines,” said Charlie Huggins.
“Next’s core proposition is clearly resonating with the UK consumer and is being augmented by intelligent acquisitions of brands like Fat Face. With inflation falling and wages rising, the economic picture also looks a lot less bleak than at the start of last year,” he added.
