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No Christmas party season hits fashion sales at Next

LaToya Harding
·3 min read
Pedestrians walk past a Next shop in Oxford Street in London March 26, 2009. Fashion and homewares retailer Next sees sales and margins falling further in 2009, it said Thursday as it posted an expected 13.9 percent profit decline for the past year. REUTERS/Stephen Hird   (BRITAIN BUSINESS)
Online sales in the UK rose by 38% in the nine weeks to Boxing Day, while the total number of online customers spiked by 24%, the group said. Photo: REUTERS/Stephen Hird

Fashion retailer Next (NXT.L) has revealed a 1.1% fall in sales in the nine weeks to 26 December compared to the previous year, amid weak demand for party wear and workwear over the festive season.

However, this was better than the company’s central guidance in October of a 8% drop as online sales offset the loss from physical retail stores.

The company, which is the first major UK listed non-food retailer to update on Christmas trading, also received a boost from loungewear and sportswear sales as people were forced to stay at home to curb the spread of COVID-19.

Online sales in the UK rose by 38% in the nine weeks to Boxing Day, while the total number of online customers spiked by 24%, the group said.

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Next now anticipates full-year profit before tax to be £342m ($464m) due to better sales in November and December. Net debt is forecast to reduce by £487m to £625m.

The high street bellwether also expects a 14% loss of full-price retail sales this month due to the third national lockdown in England which closes 90% of its stores. It also warned that it would be hit by the costs of clearing more of its retail end-of-season sale stock online.

Next added in its trading update that it has not experienced any disruption due to Brexit and all its systems had been updated accordingly.

Next shares rose more than 8% in early trade on the back of the news.

Stock rose 8% in early trade in London. Chart: Yahoo Finance
Stock rose 8% in early trade in London. Chart: Yahoo Finance

Simon Wolfson, Next’s chief executive, also confirmed to Reuters on Tuesday morning that the retailer is part of a consortium bidding for some of Philip Green’s Arcadia brands. However, he stressed that it is not looking at taking a majority stake in any Arcadia deal, the newswire said.

Last month, it was reported that Next was in advanced talks with US investor Davidson Kempner Capital Management about a joint bid to win control of the collapsed empire.

According to sources at the time, Next and Davidson Kempner were “likely, but not certain” to bid for the high street empire, with the US-based firm providing the majority of the funding required to complete a takeover.

Davidson Kempner, which gave a £180m ($243m) emergency loan to Poundland two years ago, also bought Oak Furnitureland out of administration in June.

READ MORE: UK high street visits still down over a third as lockdown lifts

Richard Lim, chief executive of Retail Economics, said: "Next continued to defy expectations against a hugely challenging backdrop of pre-Christmas lockdowns. It was able to leverage its slick online channel during this vital trading period and offer customers convenient ways to pick up orders through an expansive click-and-collect footprint.

"The retailer is benefitting from years of investment in its online channel and has proved once again its versatility in dealing with the ongoing disruption caused by the pandemic. It is far better positioned to deal with the demanding trading conditions than many of its competitors in the coming months."

Meanwhile, Richard Hunter, head of markets at Interactive Investor, said: “If it is possible for there to be any benefit from a third lockdown for retailers, it is that they have a grasp of what to expect having become unwillingly experienced from the previous ones.

“With its famed expertise in financial management, Next is a prime example of scenario planning and tends also to lean on the side of caution.”

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