Next kicked off the UK high street’s Christmas reporting season on a relatively positive note on Wednesday, upgrading its profit guidance after cold weather led to unexpectedly strong sales in the run-up to the holidays.
The FTSE 100 group, often seen as a bellwether for the wider high street, said full price sales in the 54 days to December 24 increased 1.5 per cent year on year, significantly better than the 0.3 per cent decline it had predicted.
As a result, Next said its central forecast for pre-tax profits for the 12 months to the end of January is now £725m, compared to its earlier estimate of £717m. However, it also trimmed the top end of its guidance, and said exact profits will depend on the outcome of its January sales.
The company had previously warned that it was expecting a weak Christmas season after struggling with “extremely volatile” trading during much of the second half of 2017.
There were signs that that volatility continued despite the recent improvement, however, with Next attributing some of the sales improvement to the “much colder weather leading up to Christmas”.
The company said some of the “headwinds” it struggled against in 2017 – particularly cost price inflation – are likely to “ease” over the next 12 months. Next is expecting an improvement in full-price sales growth, with preliminary estimates of a 1 per cent increase compared to this year’s predicted 0.3 per cent growth. Nonetheless, the company said profits will continue to decline, albeit at a slower rate.