Next set for milestone results

Fashion chain Next is set to mark a milestone on Thursday when results are expected to show annual profits overtaking those of high street bellwether Marks & Spencer for the first time in its history

A Next store on Oxford Street in Central London
A Next store on Oxford Street in Central London

Retailers continue to take the limelight next week, with supermarket Sainsbury’s, fashion chain Next and online player ASOS lining up to report figures.

Fashion chain Next is set to mark a milestone on Thursday when results are expected to show annual profits overtaking those of high street bellwether Marks & Spencer for the first time in its history.

A stellar Christmas sales performance saw Next up its profit forecast for the second time in just over two months, with the group now expecting earnings for the year to January 25 to surge by up to 12.6%.

It notched up a better-than-expected 11.9% jump in sales from November 1 to Christmas Eve, with sales increasing by 7.7% across its stores and 21% in the Next Directory catalogue and online division.

The group left rivals such as M&S in the shade, helped by its long-held policy of not discounting before Christmas.

M&S and a raft of clothing retailers resorted to hefty pre-Christmas discounting, which damaged profit margins.

But Next held firm in the face of competitive conditions and said it went into the January clearance sales with 11.5% less stock to shift after its robust festive sales.

It expects to earn between £684m and £700m in its full year, up from a previous range of between £650 million and £680m.

This puts it on course to make more money than M&S for the first time since it launched in 1982, with M&S predicted to see underlying annual pre-tax profits fall to £628m.

Analysts at Nomura said Next put in “an extraordinary performance in the context of difficult autumn trading for the sector and was driven by areas such as knitwear and sleepwear, which were not as strong for peers”.

They put its success down to the launch of free next day delivery for orders placed by 10pm, as well strong growth in homewares and international online sales.

“However, we think that customers are likely buying from Next at full price because they believe the group’s products offer them good value,” they added.

Sainsbury’s is expected to break its three-year record of consistent underlying sales growth when it publishes figures on Tuesday, as it battles against the might of discount chains and comes up against tough comparatives from a year earlier.

Analysts are forecasting a decline of around 3% in like-for-like sales in a sharp reversal of recent fortunes.

The drop would bring to a close its lengthy run of sales growth, having seen underlying sales increase for 36 quarters in a row, and marks a downbeat end to the year’s trading for outgoing boss Justin King.

It put in the best performance of the “big four” players, but still came under pressure as it admitted it was likely to miss expectations for a full year like-for-like sales increase of 1% to 1.5%, prompting analysts to shave annual profit forecasts.

The fourth quarter update will make for “grim reading”, according to retail analyst Andrew Porteous at Agency Partners.

He is pencilling in a 3% drop, with the chain suffering after failing to follow a tough act from the previous year, when it outperformed many rivals amid the horsemeat scandal and benefited from the timing of Mother’s Day trade.

Despite the sales tumble, he said Sainsbury’s is still managing to beat its three closest rivals.

Shore Capital Stockbrokers is forecasting a like-for-like fall of between 2.5% and 3%.

The chain is also expected to come under pressure as rivals look to fight back against the rising popularity of discounters Aldi and Lidl.

Its three main rivals have all launched price slashing campaigns in recent months, with Morrisons the most recent to join the fray with a £1bn campaign over three years to stem sliding sales.

Embattled Morrisons boss Dalton Philips said the grocery sector was facing the biggest structural shift “since the 1950s and the advent of supermarkets” as shoppers turned to discounters to make savings.

It came as the Bradfrod-based chain slumped to a £176m annual loss.

Sainsbury’s has put in a resilient performance in recent months, with the latest data from Kantar Worldpanel showing it held its share at 17% in the 12 weeks to March 2, while Tesco, Asda and Morrisons all lost ground.

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