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* Next is first major listed retailer to update on Christmas
* Full price sales up 5.2% in Christmas period
* Raises sales and profit guidance for 2019-20
* Forecasts sales and profit growth in 2020-21
* Shares up 60% over last year
(Adds detail, CEO, analyst comment, shares)
By James Davey
LONDON, Jan 3 (Reuters) - British clothing retailer Next
raised its full-year profit forecast after a
better-than-expected Christmas performance, fueling hopes the
wider sector may have enjoyed solid festive trading and see a
pick up in fortunes in 2020.
The first major stock market-listed retailer to update on
Christmas trading also forecast sales and profit growth for its
2020-21 financial year, which begins in late January.
Chief Executive Simon Wolfson said the fundamentals of the
UK economy remained sound, with wages growing faster than
inflation and employment still increasing.
However, he cautioned that the trend of the last two years
of a shift to spending on leisure and entertainment at the
expense of items such as clothing was set to continue.
"We're not expecting any sort of significant swing into the
clothing economy but the general consumer economy we don't think
is in bad shape," Wolfson told Reuters on Friday.
Shares in Next were down 1.2% at 1048 GMT, having risen 60%
over the last year in a reflection of the retailer's sound
trading performance through 2019 despite a tough economic and
political backdrop.
"Next will be pleased with its Oct-Dec performance...That’s
mildly encouraging for the sector as a whole," said analysts at
Peel Hunt.
"We expect the UK shoppers’ mood to continue to improve into
2020, which could mean that expectations, which are admittedly
on the floor, start to be beaten," they said.
Next said full-price sales including interest income rose
5.2% in the period from Oct. 27 to Dec. 28, the bulk of its
fiscal fourth quarter, compared to Next's internal forecast of
4.1% and third quarter growth of 2%.
The group -- which trades from about 500 stores in the UK
and Ireland, about 200 stores in 40 countries overseas and its
Directory online and catalogue business -- said its performance
in the period was helped by a much colder November than in 2018
and by improved stock availability in both its retail stores and
online.
As a result Next raised its full-price sales growth guidance
for the year by 0.3 percentage points to 3.9%. It also increased
profit guidance by 2 million pounds ($2.6 million) to 727
million pounds, which would be 0.6% up from that recorded in the
year to January 2019, and forecast earnings per share (EPS)
growth of 5.4%, partly reflecting share buy backs.
STRUCTURAL SHIFT
While sales in Next's stores fell 3.9% over the period, its
online sales rose 15.3%, neatly illustrating the clothing
industry's structural shift from physical to virtual stores.
The group says its stores will remain profitable even if
they become less productive. It plans to grow floor space by
less than 1% in the coming year.
Wolfson, a prominent Conservative supporter and Brexit
backer who sits in the upper house of Britain's parliament, said
Next's Christmas performance had not been effected by last
month's decisive UK general election result, which saw Prime
Minister Boris Johnson secure a commanding majority.
"In the year just gone people hugely exaggerated the effect
of political turmoil on the consumer. Our observation was the
news flow made very little difference to consumer sales in our
sector at our price point," he said.
"So I'm not expecting the improvement in the political
environment to necessarily flow through into an improved
consumer environment."
For the year beginning January 2020, Next's guidance is for
full-price sales to increase 3.0%, profit to grow 1.0% and EPS
to rise 3.4%. Surplus cash generation was forecast at 290
million pounds.
A host of British retailers will next week update on their
Christmas trading, including Tesco, Sainsbury's
, Morrisons and Marks & Spencer's.
($1 = 0.7621 pounds)
(Reporting by James Davey, Editing by Paul Sandle, Kirsten
Donovan)
