UK DIY News
Next raises profit target as Christmas sales exceed estimates
Next Plc, the UK’s second-largest clothing retailer, said full-year profit will at least be at the higher end of its forecast after Christmas sales beat estimates.
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The shares gained as much as 4.3 percent, the most in five months, as the Leicester, England-based company said sales rose 3.9 percent in the 54 days ended December 24. That beat the 3.5 percent median estimate of seven analysts compiled by Bloomberg.
Pretax profit for the fiscal year ending this month will be 611 million pounds ($992 million) to 625 million pounds, Next said, tightening the range from 590 million pounds to 620 million pounds. The retailer refrained from offering discounts until after Christmas to maintain profitability and reduced the amount of inventory in its clearance sale by 8.2 percent.
“The company was one of the winners over Christmas helped by a strong range geared to the colder weather,” said Freddie George, an analyst at Seymour Pierce in London. He has a hold recommendation on the stock.
Next rose 3.3 percent to 3,898 pence at 8:25 a.m. in London trading, heading for the highest close since at least 1988. The shares surged 36 percent last year, more than the 5.8 percent gain in the UK benchmark FTSE 100 Index.
Sales growth was led by the Directory home-shopping unit, which increased holiday revenue by 11 percent.
Subdued Outlook:
Sales in the retailer’s stores rose 0.6 percent, helped by a 2.2 percent increase in selling space.
Next expects the consumer climate to remain “subdued, but steady” in the year ahead.
“Employment is holding up, so overall people have still got money, but the value of the money they are earning is falling relative to prices,” Chief Executive Officer Simon Wolfson said in a telephone interview. “As long as inflation is rising faster than earnings, which we think it will for at least a year so, one way or another consumers will have to find ways to save money.”
The overall level of discounting over the holiday “was less than the same point last year,” Wolfson said.
Next has been opening stand-alone home-furnishings stores, improving online delivery times and offering more higher-priced aspirational fashion.
Regardless of the economic climate, the CEO said Next will continue to expand the Directory unit and open more new stores in the U.K. Online is much less capital intensive, he said.
Source : Sarah Shannon – Businessweek
www.businessweek.com/news/2013-01-03/next-raises-profit-guidance-as-christmas-sales-beat-expectations
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