Next lowers profit forecasts but Christmas sales rise

( via– Thur, 3rd Jan 2019) London, Uk – –

Shares in Next, which fell 10% last year, rose more than 6% as Christmas trading offers cheer the high street.

Fashion chain Next lowered its profit forecasts but said sales over the crucial Christmas trading period rose.

The retailer downgraded its full-year profit forecast to £723m, from the £727m previously expected.

It blamed the lowered guidance on the sale of seasonal products, such as personalised gifts and beauty products, which bring in lower profits than clothing.

Next also said it faced higher costs associated with selling products online.

But it said full-price sales for the festive period were in line with expectations, up 1.5% between 28 October and 29 December.

Sales at its 500 stores slumped 9.2% over the Christmas trading period, but this was offset by a 15.2% surge online.

Next's trading update will come as a relief to the high street, which has been decimated with consumers tightening their wallets and switching their spending online.

There had been fears Next could join other retailers in starting to discount products before Christmas to bring people through the doors.

Online fashion group ASOS fuelled a Christmas crisis when it issued a profit warning in the run-up to the holidays – raising fears the high street malaise had spread online.

Paul Hickman, analyst at Edison Investment Research, said: “What these results from Next show is that a closely managed business with an appropriate strategy to migrate online, can limit risk to relatively small proportions.

“Arguably, that strategy is moving even faster than expected, and the company appears to be building share in the online market, where the pre-Christmas warning from ASOS had fuelled concerns.”

The latest updates come as HMV appointed administrators and follows on from the demise of Poundworld, Maplin and Toys R Us last year.

A last-minute rush to buy gifts on Christmas Eve helped sales at John Lewis to rise 4.5% in the week to 29 December, the department store said on Wednesday. It plans to report a “more meaningful picture” of trading on 10 January.

Shares in Next, which fell 10% last year, rose more than 6% at the start of trade.

Marks & Spencer and Associated British Foods, which owns Primark, saw their stocks rise more than 2% on Next's trading update.