Next emerges as ‘festive winner’ after strong Christmas sales

Next has credited its strong multi-channel service with helping push sales up 11.9 per cent year on year in the seven weeks to Christmas, suggesting that the festive period may not have been the washout expected for retailers after deep discounting on the high street in the run-up to Christmas Day.

Analysts credit decision not to discount in run-up to Christmas with a sales boost at high street retailer Next.

Next says sales were “significantly ahead of expectations” as products including seasonal knitwear, nightwear and gifting items boosted trading for the period 1 November to 24 December. It has now raised its pre-tax profit forecast for 2013 to between £684m and £700m after sales so far this year came in 1.25 per cent ahead of its top guidance.

Next is the latest retailer to report healthy Christmas numbers after both John Lewis and House of Fraser posted robust festive trading updates. Analysts say its decision not to discount in the run-up to Christmas paid off, with Conlumino labelling Next a “festive winner” in terms of both sales and profits.

Neil Saunders, managing director at Conlumino, says: “Although the high street was engulfed in a sea of red promotional tickets, it was not necessary to discount to achieve success.

“That Next has a strict policy of not discounting outside of sales periods continues to pay dividends and is something other retailers should take heed of. Not only does it ensure that customers’ expectations are managed in as much as they do not hold off buying in the hope of a discount, it also ensures that, operationally, margins are maximised.”

John Lewis also trumpeted its decision to hold off on its sale until 27 December with helping maintain its sales and profit margins.

Speaking to Marketing Week, managing director Andy Street said: “We matched competitors’ prices through [price match guarantee] Never Knowingly Undersold but held off our own clearance sale until 27 December.

“If your product is right then the price will sustain itself until then.”

However, there are concerns that many on the high street will have struggled after a number of retailers cut prices more deeply and earlier to boost sales at the expense of profit margins.

Debenhams issued a profit warning earlier this week, blaming “unprecedented” promotional activity. Attention is now turning to retailers such as Marks and Spencer, which offered discounts in a last-minute bid to woo shoppers and is set to report its results next week.

At Next, sales at its stores rose 7.7 per cent, while online sales were up 21 per cent over the period. The retailer says “increased confidence” in online deliveries meant more customers bought from its directory business right up to the weekend before Christmas.

“Next’s excellent multichannel platform allowed it to maximise trade. This is a credit to Next’s operational efficiency which has created confidence among consumers that its online operation delivers, in the very literal sense of the word,” says Conlumino’s Saunders.

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