3rd Jan 2019 10:24
LONDON (Alliance News) - Next PLC on Thursday said trading in the key Christmas period came in line with the company's expectations, though the retailer lowered its annual profit guidance.
Next, the first London-listed retailer to reveal its performance for the important festive trading period, said strong sales in the three weeks prior to Christmas along with a good half-term holiday week at the end of October made up for disappointing sales in November.
For the period from October 28 to December 29, the retailer recorded full price sales growth of 1.0% on the year ago period, with online sales rising 15% and retail sales declining 9.2%. Total full price sales including interest income for the period grew 1.5% on the prior year, in line with the company's September guidance.
For the year to December 29, full price sales grew 2.6%, with online sales rising 15% and shop sales retreating by 7.0%.
Shares in the clothing and homewares retailer were trading 5.1% higher at 4,389.00 pence each on Thursday. Fellow retailers Marks & Spencer Group PLC and Debenhams PLC were up 2.2% and 6.6%, respectively, on investor hopes for a similarly upbeat Christmas performance.
Next said it now expects group pretax profit for the year ending late January to total GBP723 million, down 0.6% from previous guidance of GBP727 million.
The GBP4 million cut to profit guidance was blamed on margin reduction and operational costs associated with higher online sales.
Next expects to take a GBP1.5 million hit from higher sales of lower margin seasonal products such as personalised gifts and beauty products. The remaining GBP2.5 million profit reduction was attributed to increased costs.
Total full price sales for the current financial year are estimated to grow 3.2% on the year prior, up slightly from previous guidance of 3.0% reiterated in October. Annual earnings per share is estimated to grow 4.4% year-on-year, down from a previous 5.0% growth estimate.
The industry bellwether also released its earnings predictions for the year to January 2020. It is assuming a similar economic environment experienced in the second half of 2019 financial year and has excluded effects of Brexit into its estimates.
Next estimates pretax profit to total GBP715 million, down 1.1% compared to the new guidance issued for the current financial year. Earnings per share is anticipated to grow by 3.6%. Total full price sales for the new financial year are expected to rise 1.7% year-on-year.
The FTSE 100-listed company also said it hopes to record GBP300 million surplus cash in the new financial year and will continue with its policy of returning surplus cash to shareholders through share buybacks.
Analysts welcomed the company's positive trading performance.
Liberum upgraded Next to Buy from Hold, saying that the company's shares look oversold following the Christmas trading statement. It has retained 6,100p target price on the stock.
Russ Mould, investment director at AJ Bell, said Next is looking in rude health relative to the rest of the ailing UK retail sector.
"The fact that Next has barely changed its earnings guidance despite high-street gloom is deemed a major success by investors, hence why its share price has shot up on the news," he commented.
Mould continued: "Next is a best-in-class retailer which is striving to have superior customer service, good stock control, decent product range and clean, tidy stores. Those attributes should help it stand above the crowd. It also helps that the business is highly profitable, has a strong balance sheet and is cash generative which gives it the ability to cope with any margin pressures and any further decline in high street footfall."
Next is slated to release its results for the full year ending January 2019 on March 21.
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