Next sales up 1.5% after online Christmas boost
Written by Hannah McGrath
Next has put a spring in the step of the High Street by announcing a 1.5 per cent rise in sales over the Christmas trading period, with an in-store fall offset by a strong performance from its online business.
Shares in the company jumped six per cent after it posted a boost in overall sales between 28 October and 29 December.
The figures showed that sales at Next’s 500 physical stores were down 9.2 per cent on the same period last year, but this slump was offset by a 15.2 per cent rise in online sales.
Whilst total full price sales were in line with the company’s expectations, online sales were £17 million, 2.2 per cent ahead of expectations, and physical retail sales came in at £16 million, 1.7 per cent below forecasts.
The fashion chain, which is considered a bellwether for the health of the UK retail sector, downgraded its full-year profit forecast to £723 million from initial estimates of £727 million, citing lower profit margins on a range of seasonal products such as personalised gifts and beauty as well as higher costs associated with selling online.
A statement released by Next said that it was expecting further growth in online sales for the year ahead, with a forecast that physical retail sales will be down 8.5 per cent on 2018 while online business will be up 11 per cent, in line with the wider shift in consumer spending towards online shopping.
The update will come as a relief to the High Street, following a period of heavy discounting and the collapse of music retailer HMV and menswear chain Greenwoods after a difficult Christmas trading period.
Shares in other retailers including Marks and Spencer, and Primark owner Associated British Foods were up two per cent on Next’s update, hinting at optimism in advance of the publication of Christmas sales figures from Debenhams and M&S in the coming weeks.
John Lewis Partnership also spread cheer this week when it announced that last-minute surge in gift buying on Christmas eve had boosted sales by 4.5 per cent in the week to 29 December.
It had been thought that High Street retailers were losing out to online players as consumer spending habits shifted over the course of 2018, but online fashion giant ASOS sent jitters through the sector last month when it issued a profit warning in the run up to Christmas, blaming challenging trading conditions.
The sector is braced for further turbulence in 2019 following a torrid year for retailers in 2018, which saw House of Fraser, Toys R Us, Maplin and Poundworld all call in the administrators.
Angus Burrell, general manager omni-channel solutions at payments specialist Valitor, said: “Next’s recent results would appear to provide a ray of light for many in the retail sector – dig a little deeper though and it is clear that the UK retail sector is still under pressure.
“The growth of Next’s online business is good news, and when combined with omnichannel strategies such as click and collect can offer a welcome boost to High Street stores.
"However, while some retail strategies are working to improve the customer experience and generate profit, others are making things worse.
“By focusing on price, retailers are entering into a race to the bottom for short terms gains,” he continued.
“This, however, prevents them from improving the customer experience as resources are taken away to lower costs further. The retail sector needs to wake up and realise that price wars are not the answer and instead get back to focusing on the customer experience. “