Next delivered a better set of Christmas trading figures after benefiting from the cold snap that swept the nation in the lead up to last year’s holiday season.
The British high street retailer reported sales during its all-important holiday period between 1 November and 24 December were up 1.5% year-on-year, beating its original prediction of -0.3% lower sales.
Both its traditional flagship stores and online channels saw an improving sales picture, with its online division continuing to lead the charge with sales growth of 13.6%.
As a result, Next upgraded its full year profits to £725m, £8m higher than previously advised.
However, the retailer warned that “many of the challenges we faced last year look set to continue into the year ahead”.
“Subdued consumer demand driven by a decline in real income, the increase in experiential spending at the expense of clothing, and inflation in our cost prices remain challenges for 2018,” it said.
But the retailer added that “some of these headwinds will ease” during the year, including the level of price inflation, which it expects to reduce to 2% before disappearing in the second half of the year.
Markets were encouraged by Next’s revised profits forecast, sending its shares flying 9% to £49.33 per share in early trading, the highest price they have fetched since October last year.
The FTSE 100, which started off the new year in a slump, down 0.74%, was trending upward Wednesday morning and was 0.07% higher at the time of writing.
Though Next is often considered a bellwether for the UK retail industry, The Share Centre’s investment research analyst Helal Miah cautioned that problems for the UK retail sector, like “falling consumer incomes, confidence and cost pressures” from lower sterling still abound.
“This one positive trading update should not lead to wholesale changes in expectations for the sector as we believe the challenges faced by the industry are longer term in nature and it’s very difficult to predict consumer behaviour in the Brexit environment,” he said.
“We still remain cautious on the retail sector, and continue to recommend Next as a ‘hold’.
“However, those looking to take a more adventurous approach may want to look at the likes of Next for some recovery potential along with the return on capital that management is committed to through share buybacks and an attractive dividend yield.”
Carillion in hot water
Meanwhile, Carillion confirmed that it is being investigated by the UK watchdog over company announcements.
The FTSE 250 construction company said in a statement that it was currently under investigation by the Financial Conduct Authority (FCA) over the “timeliness and content” of announcements it made between 7 December 2016 and 10 July 2017.
Carillion confirmed that it was “cooperating fully” with the FCA’s probe.
The period in question was a difficult one for Carillion, mired by two consecutive profit warnings in July and November, which saw its shares drop 40% and 20%, respectively. Within a year, its shares have lost over 92% of their value, falling from £2.38 to their current 17.4p.
In light of the fresh FCA probe, its shares opened 1.3% lower at 17.7p and swiftly fell to 17p within the first half hour of trading.
