Next’s (NXT) sales return to growth with strong online performance

Next sales returned to growth last quarter, bolstered by the retail chain’s online division.

The figures

In the quarter to 29 October, Next’s retail sales fell 7.7 per cent, but its directory sales, which includes website and catalogue sales, jumped 13.2 per cent.

Total sales for the period rose 1.3 per cent. For the year to date, sales were down 0.3 per cent.

The retailer narrowed it full-year profit forecast upwards to between £692m and £742m. Its previous forecast range was between £687m and £747m.

Why it’s interesting

Next has had a rocky year. In March, the chain announced a fall in profits for the first time in eight years, and the firm subsequently trimmed its full-year guidance.

Then, in summer, Next’s share price jumped more than nine per cent when its sales beat forecasts and chief executive Simon Wolfson said he was “marginally less pessimistic” about the business’ future.

Weeks after, the company’s share price faltered again when Berenberg analysts downgraded its rating, saying Next had an oversized store estate.

Neil Wilson, analyst at ETX capital, said this morning that Next’s sales seemed to be improving, but that the retailer’s volatile sales were a cause for concern.

“Next better hope that British shoppers are a little less fickle than the weather, because sales performance is so volatile the firm has no idea what to expect over the vital Christmas trading period,” Wilson said. “This is a worry, although there does seem to an improving trend in sales growth throughout the year that may calm nervous investors.”

What Next said

The company said: “Sales performance has remained extremely volatile and is highly dependent on the seasonality of the weather. In August and September sales were significantly up on last year, as cooler temperatures improved sales of warmer weight stock. The change in sales trend came at precisely the same time UK temperature became warmer than last year.”