Next lifts FY profit guidance after better-than-expected Christmas sales

In the nine weeks to 30 December, full price sales rose 4.8% versus last year. This was £66m ahead of the company’s previous guidance of a 2% decline for the period. Next said both the online and retail segments exceeded its full price sales expectations, with retail "particularly strong".

"We think that we underestimated the negative effect Covid was having on our retail sales last year," it said. "We may have also underestimated the effect improved stock levels would have on both businesses (stock levels were exceptionally low last year as a result of widespread supply chain disruption)."

Next upgraded its full-year pre-tax profit guidance by £20m to £860m, up 4.5% on the year. Nevertheless, the group said it remains cautious in its outlook for the year ahead. Initial guidance for the year ending January 2024 is for full price sales to fall 1.5% and for pre-tax profit to decline 7.6% from the current year to £795m.

"Some might think this forecast is overly cautious in the context of our performance in the second half of this year," Next said. However, it believes that demand is likely to be dampened by inflation in essential goods, particularly energy, rising mortgage costs as consumers' fixed interest rate deals expire, and continued price inflation in its own products.

The retailer also said on Thursday that its end-of-season sale was progressing well and clearance rates are ahead of its expectations.

"Markdown stock and sales were much higher than last year, mainly as a result of the exceptionally low surplus stock levels last year," it said.