Shares in high street fashion retailer Next were up more than 7 per cent this morning on the back of a strong Christmas and despite warnings that things would be tough in 2023.
The group’s share price was up around 400p at 6,500p – which is well up on a recent low of around 4,400p in mid-October.
Announcing its festive trading figures the Leicestershire-based group said its 2022 pre-tax profits would be better than expected, up 4.5 per cent on 2021 at £860 million – against the £840 million it predicted in November.
It expects full-year sales of £4.6 billion, up 6.9 per cent on 2021, but warned of higher prices and falling profits in the year ahead.
Speaking to the PA news agency, chief executive Lord Simon Wolfson said consumer spending had been better than predicted in the face of painful cost pressures with shoppers dipping into their pandemic savings.
He said: “Employment has held up very strongly – that’s unusual in a recession.
“That has given people the confidence to spend through the Christmas period.”
Market analysts said “under-promising and over-delivering” had become a hallmark of Next and it had once again exceeded expectations with its Christmas trading.
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Julie Palmer, a partner at business recovery specialist Begbies Traynor, said: “Headed by retail guru Lord Wolfson, the company has reputation as a bellwether of what’s really going on in the economy.
“It’s sometimes cautious forecasts are one of the most reliable guides to the future.
“Next said that when sales shot up starting in early December, it wasn’t down to customers forgetting the cost-of-living crisis and splashing out on presents.
“Instead, it was the cold snap that sent them searching for warm clothes, having not bought winter kit during the abnormally warm autumn. This drove sales higher over Christmas, rather than falling as initially predicted.
“Next edged up its current year forecasts, but warned performance in the coming year is likely to be slightly worse as inflation bites and consumers’ mortgage payments rise.
“Perhaps what is most interesting is the high street giant firing a warning shot at any who might criticise it for talking down the economy. The update said current guidance is now ‘almost exactly’ what it predicted a year ago, adding that back then ‘many considered it to be overly cautious, it now appears very realistic’.
“With typical understatement, Next said it ‘only mentions this because we are concerned some might look at our forecast for 2023 and again assume we are being over-cautious’.
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“Judging by Lord Wolfson’s track record, it would be foolish to ignore this polite warning, especially coming from one of the high street’s most reliable performers and one with the scale to withstand what is likely to be a horrendous post-Christmas trading environment.
“Consumers battening down the hatches in the face of high inflation and energy bills, combined with an almost certain recession, may mean that Next ends up even stronger as tough times on the high street weaken some of its rivals.”
Russ Mould, investment director at online share dealer AJ Bell, said the high street and out-of-town shopping parks were far from dead, with B&M and Greggs also putting out good figures today.
He said: “We’re now many months into a severe cost-of-living crisis, yet the latest figures would suggest that certain retailers can still draw in the crowds if the proposition is seen to be good value for money.
“Next isn’t necessarily the cheapest fashion or home retailer, but its products are considered good quality and something that will last.
“Next, B&M and Greggs are united by having a presence on retail parks where business has been better than expected in general.
“Widespread train strikes will have prevented a lot of people from going to city centre shops, which means retail parks with their plentiful parking spaces have been the preferred alternative shopping destination.
“None of these three companies are blind to the fact that consumers are still under significant financial pressure, yet if they’ve been able to successfully navigate a tough end to 2022, there is good reason to suggest they could continue to keep their chins up as we move through 2023.”