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Next posts a positive trading update

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A discount free December proved fruitful for British clothing retailer Next, which has recorded a 2.9% rise in sales during the run up to Christmas.

Taking a massively different direction to other retailers amidst the festive season, the fashion chain chose not to launch heavy promotions, holding fire until Boxing Day when it opened at 6am and attracted a queue of 600 at one of its Oxford Street stores.

And so, due largely to online and catalogue purchases, Next hit the high end of its profit predictions, with those for the full year rising by around 11.5%.

It is now expected that profit for the year ending January 24 will sit at £10m on either side of £775m, some £5m ahead of the midpoint profit guidance Next issued in October this year.

With a warmer winter than usual affecting seasonal stock sales, there was significantly more merchandise available in the retailer’s post Christmas sale this year compared to last. The infamous bargain hunting consumers who are loyal to Next year on year, did however, keep clearance rates in line with the company’s expectations.

Neil Saunders, Managing Director of Conlumino, comments on Next’s results:

“Kicking off the festive reporting season, Next has posted a solid set of numbers, especially so given that they are measured against some tough year on year comparatives (last year total sales were up 11.9%).

The figures are a vindication of Next’s refusal to engage in pre-Christmas discounting, including the popular Black Friday event. While this may have cost Next some sales growth over the reported sales period, we believe that it has not lost it much, if anything, in terms of profits. Indeed, this is reflected the profit guidance which is some £5m ahead of where it was in October.

In many ways, the Next figures reflect the wider trend of Christmas, namely that the high street performed reasonably but was saved by online and multichannel which boosted retail sales. Next’s multichannel proposition is well developed and allows customers to seamlessly shop across stores and online - this stands in contrast to some of its rivals in the clothing space.

Initial evidence suggests that Next has had a strong start to its sales period. That Next is able to maintain the interest in its sale events again reflects the fact that it does not engage in regular discounting activity. We believe that this bodes well for the sell-through of surplus stock and, in the long run, will be helpful to margins and profits.”

Published on Tuesday 30 December by Veebs Sabharwal

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