LONDON (Alliance News) - Homeware and clothing retailer Next PLC Friday said that sales in the fourth quarter have been significantly ahead of expectations, boosted by online sales and strong trading in the run-up to Christmas and in its end-of-season sale.
Next said that total sales, from both its retail stores and online business, rose almost 12% in the period November 1 to December 24, and were up 5% in the year to date.
It said that sales to date are now 1.25% ahead of its top-end guidance forecast it gave back in October.
Boosted by strong fourth-quarter sales, Next said that it now expects a pretax profit of between GBP684 million and GBP700 million in the year to January 25, and it declared a special dividend of 50 pence per share.
The retailer had raised its upper-end pretax profit expectations as recently as October, to its previous guidance of up to GBP680 million.
Next said that it expects sales growth from both its stores and online business, of between 10% and 12.6% for the full financial year.
The FTSE 100 retailer said that for the full year, it expects basic earnings per share growth of between 21.6% and 24.5%, boosted by a combination of profit growth, a lower corporation tax rate, and a share buyback of GBP296 million.
Next said that the step-up in Christmas trade was mainly the result of improvements in its seasonal knitwear, nightwear and gift offer.
It said that sales at its retail stores were up 7.7% during the period, and were up 1.2% in the year to date.
While the Next high-street stores reported strong sales growth, its online business remains the main growth driver. The retailer has been busy developing its online business, by improving its UK services and investing in overseas markets.
It said that online NEXT Directory sales grew 21% in the weeks from November 1 to December 24, and rose 5% in the year to date, 2% of which net sales came from new space.
Next said that total stock for its end of season sale was down nearly 12% on last year, due to a strong run into the Christmas period, and it now expects final clearance rates to be marginally ahead of last year.
However, Next said that it is unlikely that the strength shown in the fourth quarter will continue through to the first half of the new financial year.
Next said that it holds a cautious outlook for the steadily improving UK economy and consumer sentiment, although it continues to focus on further cost savings, adding profitable new space, and growing its NEXT Directory online business both at home and abroad.
It said that in the year ahead, its budgets are based on growth in total sales of between 3% and 7%, and that it expects pretax profit to be up broadly in line with sales.
It said that in the year ahead, it currently expect to generate and return a further GBP300 million of surplus cash, which it said will be returned either through further quarterly special dividends or buybacks, depending on the share price.
Next's sales performance for the Christmas period is in stark contrast to rival retailer Debenhams PLC, which issued a profit warning at the beginning week, citing heavy discounting as the cause for a significant profit drop. It said that it now expects a first-half pretax profit in the region of GBP85 million, down on last year's GBP114.7 million, and a lower gross margin due to product category mix and higher markdown of its goods. It also ceased its share buyback.
On Thursday, Debenhams Chief Financial Officer Simon Herrick resigned.
By contrast, The John Lewis Partnership, which compromises of John Lewis department stores and Waitrose supermarkets, said Thursday that total sales reached GBP734 million for the five weeks to December 28 2013, up 7.2% on last year and 6.9% on a like-for-like basis.
Next is expected to release its full year results on March 20.
By Rowena Harris-Doughty; rowenaharrisdoughty@alliancenews.com; @rharrisdoughty
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Next (NXT)