Next enjoys sales lift in the last three months of 2013

3rd January 2014

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High street fashion retailer Next has enjoyed a bonanza Christmas period with sales significantly ahead of expectations writes Philip Scott.

Total sales in the period between the start of November and 24 December were up by 11.9% while Next retail sales were ahead by 7.7% and directory by 21%.

The strong performance in part reflected one extra trading day in the pre-Christmas period this year, but the underlying outcome was still well ahead of expectations.

The result is in stark contrast to that of Debenhams, which issued a profit warning on Tuesday.

As a result of the strong performance in the last three months of the 2013, Next’s full year sales are expected to be better than the previously forecast and profit before tax is anticipated to be circa £684m to £700m, an increase of 10% to 12% on the previous year.

The group, which has seen its shares soar by 47% in the past 12 months also also announced that a special dividend of 50p per share would be paid out in early February to shareholders.

Sam Hart at broker Charles Stanley says: “We expect trading conditions in UK General Retail to remain challenging in 2014/15, with the consumer staying relatively subdued and the competitive landscape intense.

“We see potential, however, for Next to continue to deliver solid sales growth, driven by the Directory business and the addition of some new space in the Retail business. Best in class operational efficiency means we also anticipate steady progression in profit before tax.

“Free cash flow is expected to remain strong, with the surplus being returned to shareholders via special dividends or share buybacks. The valuation looks up with events for now, but we see potential for consensus earnings estimates to rise further during the year and maintain our recommendation at ‘accumulate’.”

Next chief executive Simon Wolfson however cautioned that the firm’s robust performance was unlikely to continue in the first half of 2014, warning about confidence among cash-strapped consumers.

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