Even though management has revised down full-year profit expectations by 0.6 per cent at clothing chain Next (NXT) – the result of higher sales of lower-margin, seasonal products and increased costs associated with online growth – the overall picture is far better than analysts and investors feared.
Full-price sales over Christmas rose 1.5 per cent, with good growth also reported in the three-week lead-up to the big day. Year-to-date online sales have risen 15 per cent – comfortably offsetting a corresponding 7 per cent squeeze across physical stores – a performance analysts at Liberum called “excellent” in light of a difficult November for all retailers. Although clearance activity in January could lead to a "further £5m swing" in profit "in either direction", Liberum said Next's performance over the festive trading period was "admirable", particularly when compared with the scale of downgrades issued by other retailers in recent weeks.
With a flurry of retail updates still due this month, it’s too soon to tell just how the industry fared during the peak trading period as a whole. But early indications – not only from Next but also department store chain John Lewis – suggest those retailers who have prioritised digital channels and invested in warehousing, distribution and logistics could come out top. The day before Next's numbers hit the market, John Lewis revealed an 11 per cent surge in sales during the last week of 2018 as customers went on the hunt for last-minute gifts.
