Next PLC (LON:NXT) has increased its full-year profit guidance, once again, after sales over the key Christmas period beat the firm’s own forecasts, but its shares retreated from earlier gains as the wider market took a tumble.
For the period from 27 October to 28 December, the FTSE 100-listed clothing retailer reported that full-price sales had risen 5.2%, 1.1% ahead of their estimates, as 15.3% growth in its online division offset a 3.9% decline in sales from its stores.
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Next attributed the festive sales growth to a “much colder November” than 2018 as well as improved stock availability.
As a result of the improved performance, the company upped its full-year profit guidance to £727mln from previous forecasts of £725mln, representing year-on-year growth of 0.6%, while sales for the year are estimated to grow by 3.9%.
For the coming year to end January 2021, Next is predicting sales growth of 3%, resulting in profit growth of 1% year-on-year to £734mln.
The group is also planning to return half of its surplus cash, around £145mln, to shareholders in the form of either a share buyback or special dividend.
Profit upgrade a welcome development
Richard Hunter, head of markets at interactive investor, commented: “As many retailers bemoan the current trading environment and struggle accordingly, Next continues its strong march ahead.
"Another concern around the sector is the extent to which Black Friday sales may simply have brought forward transactions which would have happened anyway during the festive period. Again, Next has no such concerns, with full-price sales – including a boost from items bought on credit in the form of interest income – rising 5.2% year-on-year.
"Indeed, the outperformance has exceeded the company’s own expectations and the resulting profit upgrade is a welcome development."
However, after adding nearly 1% in early trading, Next shares reversed by a similar amount, down 1.1% to 6,882p.
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