Sparks commentary

Consumer

Sparks

Next (LSE: NXT) sales growth better than guided, profit guidance increased
Published by Russell Pointon

Next has kicked off the trading update season with strong sales growth of 5.7% in the nine weeks to 28 December (adjusting for the timing of the end-of-season sale). This performance is ahead of management’s prior guidance of 3.5% growth. As a result, Next has increased its profit before tax expectations by c 0.5% to £1,010m. In the UK, the better-than-expected sales growth was driven by a relative improvement in online sales at the expense of store sales.

For the coming year, management has guided growth in full price sales of 3.5%, profit before tax of 3.6% and pre-tax EPS growth of 6.7%. The headlines will be grabbed today by management’s comment that UK growth is likely to slow, following the changes in employer tax increases introduced in the Budget, and Next will partially offset these cost pressures by increases in selling prices of around 1%. However, the price increases are relatively modest in the context of general levels of inflation.

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