Next – an impressive Christmas performance

Next plc has announced a trading statement for the Christmas period and updated its guidance:

  • Full price sales were up 4.8% in the 9 weeks to 30 December, much better than expectations.
  • Next have increased their profit before tax guidance for the year by £20m to £860m.
  • Next is cautious about the year ahead (to January 2024), forecasting sales to be down 1.5% and profit before tax down 7.6%, as cost pressures bite.

Charlie Huggins, Head of Equities at Wealth Club, commented: “This is another impressive performance from the bellwether of the UK High Street, reinforcing Next’s reputation as one of the best run UK retailers.

“The group benefited from a cold snap in December, which has boosted demand for winter clothing, as well as the absence of pandemic restrictions, aiding store performance. Nevertheless, this shouldn’t take away from Next’s stellar execution. Many other retailers have struggled in the current environment, but Next’s proposition is clearly resonating with the UK consumer.

“Looking ahead to the next year, the environment is set to get tougher still. Next’s sales are expected to fall modestly, with profits down close to 10%, as cost pressures take their toll. That said, this outlook is not as bad as it could have been at the time of the disastrous mini-budget, when sterling was in the doldrums.

“Next expects cost inflation to peak at around 8% in the spring summer season before coming down. That looks a lot more manageable than it did a few months ago, largely reflecting the recovery of sterling (80% of Next’s purchases are in US dollars).

“Next, and the rest of UK retail, are still facing a very difficult economy in 2023. But if the recovery in sterling is sustained, it will certainly provide some succour. And even if it doesn’t, Next looks better positioned than most retailers to weather the storm.”

*Charlie Huggins owns shares in Next.