Next’s better-than-expected Christmas sales are a good signal for UK retailers

FASHION chain Next has raised hopes for the retail sector by revealing a better than expected Christmas.

This morning it reported a rise in sales over the festive period – up 1.5 per cent in the 54 days to December 24. It had previously forecast a fall of 0.3 per cent.

Part of the improvement, the company said, was down to much colder weather leading up to Christmas.

Next saw online sales jump 13.6 per cent in the period, helping to balance out  a 6.1 per cent decline in high street sales.

The high street fashion retailer launched its sale on Christmas eve, discounting items by up to 70 per cent. 

As a result, Next has increased its full-year profit guidance by £8 million to £725 million, although the figure is still a long way off last year’s £790.2 million.

The trading update will come as a relief to the retailer, which has been hammered by rising costs linked to the Brexit-battered pound and the resultant collapse in consumer confidence.

“Many of the challenges we faced last year look set to continue into the year ahead.

“Subdued consumer demand driven by a decline in real income, the increase in experiential spending at the expense of clothing, and inflation in our cost prices remain challenges for 2018,” Next said.

Chief executive Lord Simon Wolfson has already said that cautious consumers were only buying “as and when they need” as trading remains “extremely volatile”.

But the firm added that it believes “some of these headwinds will ease” through 2018, with inflation falling to 2 per cent in the first half and disappearing in the second.

The retailer expects total full-price sales this year to nudge up 0.3 per cent, rising to 1 per cent next year.

The majority of Next’s sale growth came from shopping heading online

Next is the first in a long list of sector peers due to report on Christmas trading in the coming weeks, with experts predicting that some firms could have to issue profit warnings.

Among the bevy of firms reporting figures are AO World, Morrisons, Sainsbury’s, Ted Baker, Tesco, Marks & Spencer, John Lewis, Debenhams, ASOS and Dixons Carphone.

Recent data has done nothing to inspire confidence for retailers, with figures from Springboard showing footfall in the last trading week before Christmas fell by 7.1 per cent year on year, while on Boxing Day it plummeted 5.9 per cent.

Next shares rose more than 8 per cent to 4,893p in morning trading as investors welcomed the update.

Shares in other retailers were also up, including Marks & Spencer, Debenhams, Ted Baker and Primark owner Associated British Foods.

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