The company Next has raised its expected profits for the year due to higher sales of £38m during the Christmas season. However, concerns in the Red Sea may cause delays in deliveries and potentially affect sales in the upcoming year.
The retail company specializing in fashion and home goods reported a significant increase in full-price sales, with a rise of 10% in the final two weeks leading up to Christmas. This resulted in a 5.7% overall sales increase for the nine-week period ending on December 30th, surpassing the expected 2% rise.
This marks the fifth instance in the past seven months that Next has raised its projected profits.
The upcoming year does not anticipate a need for price increases, as expenses have remained consistent. The CEO of the retail company, Simon Wolfson, had initially hoped for prices to decrease this spring. However, due to the rise in national minimum wage in April and issues in the Suez canal causing higher delivery costs, prices are now expected to remain stable.
According to Wolfson, the recent assaults by Houthi insurgents have caused shipping vessels to divert their routes around Africa instead of going through the canal. As a result, there may be delays in deliveries which could potentially impact sales. The extent of this impact will depend on the duration of the disruption. Wolfson also mentioned that prolonged sailing time can lead to capacity constraints within the network, but he does not consider it as a crisis at the moment. Instead, it is seen as an inconvenience.
The company Next reported a strong performance in online sales due to improvements in their service, resulting in a 9.1% increase in sales for the three months leading up to December. However, sales in physical stores only rose by 0.6% following a decline in the previous quarter.
The company announced that they anticipate earning a total profit of £905m for the whole year, which is £20m higher than their previous estimate.
Lord Wolfson stated that the company’s performance exceeded expectations due to underestimating the impact of online service enhancements following last year’s disruptions caused by a busy warehouse and strikes by Royal Mail.
Richard Lim, the chief executive of analysts Retail Economics, said: “These figures are astonishingly strong and they will set them apart from the competition. There’s a gap emerging between those retailers who have invested heavily in their digital proposition over the last decade with those who have not and Next is leading the pack.”
The stock price of Next increased by nearly 5% on Thursday, reaching a record high of £85.32. The company also announced that it is anticipating a 2.5% rise in full-price sales for the upcoming year, and a total increase of 6% when factoring in new brands like Gap and Reiss, as well as discounted items.
Wolfson stated that the upcoming year appears to be returning to a more typical state after three years of dealing with the pandemic and the resulting cost of living struggles. He noted that wage inflation is currently exceeding price inflation, but cautioned that this could potentially have an impact on employment.
Ignore the advertisement for the newsletter.
after newsletter promotion
The unexpectedly high trading numbers are likely to increase optimism for other retailers during the holiday season. It was predicted that shoppers would reduce their purchases of clothing due to limited household budgets and a renewed focus on travel.
Boots, a popular chemist and beauty store, announced on Thursday that it had a successful autumn and holiday season in 2023. The company reported a 9.8% increase in sales in the three months leading up to November 30th, with online sales rising by 17.5% and beauty sales by 11.4%. According to Boots, their biggest sales day was on Black Friday (November 24th), where they sold one bottle of fragrance every second.
The company will not release a report on their Christmas sales until later this year. However, they have stated that early signs indicate a successful holiday season, with sales from Black Friday until the new year surpassing last year’s impressive results.
Although the overall atmosphere was positive, JD Sports issued a warning about their profits. They cited mild weather during the beginning of autumn and unexpectedly high levels of discounts leading up to Christmas as factors that negatively impacted their sales.
Source: theguardian.com
