Next sales up as Directory outperforms stores

Next Directory sales surged 16.9% in the period, when store sales dropped 2.7%.

Next said that despite a “good” final week before Christmas, November and December sales were “disappointing given that snow adversely impacted sales in 2010”.

Next said it continues to expect full year pre tax profit on continuing business to be in line with its previous guidance, but it is now narrowing its guidance range to £7m either side of £565m. The figure would represent an increase in profit of 4% on last year. 

The retailer said that a “number” of factors have subdued sales in its final quarter and warned that the continuing crisis in the Eurozone could further dampen confidence, as well as the credit squeeze on businesses and consumers. It also pointed to weaker UK employment numbers.

However, Next said there are some positives to look out for in 2012, including an easing in inflationary pressures; last year’s Vat increase annualising in January; and Next’s selling prices stabilising year-on-year.

The clothing retailer said stock in its End of Season Sale was up 10% on last year. Next said: “The Sale has gone well and we expect final clearance rates to be slightly ahead of last year and our budget.”

The retailer said it has maintained operating margins, having not discounted in the run up to Christmas, as some of its rivals did.

Next said it will continue to focus on its five point plan to navigate the downturn:

• Setting realistic and conservative sales budgets
• Controlling costs
• Opening profitable new space
• Growing Next Directory online business, both in the UK and overseas
• Returning surplus cash to shareholders through share buybacks in order to boost earnings per share.

Neil Saunders, managing director of consultancy Conlumino, said that overall “this is a good performance from Next”.

However, he said that the decline in store sales is “particularly disappointing when set against a poor performance over the same period last year when sales shrunk by 3.1% because of the disruptive weather”.

Saunders added: “That Next has been able to deliver overall growth in a price sensitive market without resorting to discounting is impressive. In the long run we believe that Next is a Christmas winner not just because it has delivered sales growth, but because it has delivered it profitably and largely at full margin.”