High street fashion and homeware retailer Next saw its share price climb sharply on Tuesday morning, following the release of a robust Christmas trading update that exceeded market expectations.
Strong Sales Drive Share Price Surge
In early trading, the FTSE 100 company's share price rose by as much as 3% to 14,000 pence. This positive movement was a direct response to the group's performance in the final quarter of the year, where full-price sales jumped by 10.6% compared to the same period last year. This significantly outperformed analyst forecasts, which had predicted growth of around 7%.
Adam Vettese, a market analyst at eToro, noted: "Next has delivered another resilient Christmas performance, underscoring its position as one of the UK high street's strongest operators." He added that while the company's quality is recognised, the strong share price run leaves "less room for error if consumer demand softens."
Online and International Growth Powers Performance
The sales growth was fuelled by two key channels. In the UK, sales rose by 5.9%, beating expectations of 4.1%, largely thanks to a strong online performance. The company confirmed that online sales now account for more than half of all group revenue. In contrast, sales from physical retail stores grew by a modest 1.4%, highlighting the ongoing challenge of low high street footfall.
The standout success story was international trade, where sales soared by an impressive 38.3%, far ahead of the guided 24.3%. Next attributed this overperformance to increased marketing spend and the strong performance of its European partner, Zalando.
Profit Upgraded and Future Outlook
The surge in festive shoppers translated into a significant financial boost, generating an extra £51 million in profit. As a result, Next raised its full-year profit before tax guidance by £15 million to £1.15 billion, marking a year-on-year increase of 13.7%. This is the company's third profit upgrade in just over five months.
Looking ahead, however, the group struck a more cautious tone for the coming financial year. It expects total product sales growth to moderate to around 4.8%, with UK sales forecast to rise by only 1.6% due to anticipated pressures on employment and consumer confidence. International sales are still expected to grow healthily by 16.5%, but the company does not plan to increase marketing spend at the same rate.
Despite this conservative guidance, analysts remain optimistic. Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: "Next's Christmas trading update gave investors plenty to be jolly about... With Next's track record of under-promising and over-delivering, this growth target looks a touch conservative. Next remains one of the brightest sparks in the UK retail scene."
