Demand for party-wear boosts Christmas sales at Next Plc – tempered by warnings of inflation and stock shortages

Demand for party-wear over Christmas helped fashion and homewares retailer Next Plc report a busy end to 2021.

Sales for the last two months of the year were up 20 per cent on the same period pre-Covid in 2019 – £70 million ahead of expectations.

Online sales were up almost 50 per cent on two years ago.

The Leicestershire-headquartered chain said it now expects pre-tax profits for the year to be £822 million, almost 10 per cent more than two years ago.

And it expects that to rise to £860 million next year on anticipated 2022/23 post-Covid sales of £4.6 billion.

In a trading update Next said it was declaring a special dividend of 160p per share and expects to go back to a pre-pandemic dividend timetable in the year ahead.

But it warned that increased freight costs, lower stock levels, labour shortages in warehousing and distribution, and higher wages will have a bigger impact in the months ahead.

It expects its staff wages to be up 5.4 per cent this year while the cost of its products will be up 3.7 per cent in the first half of the year and 6 per cent in the second.

Shares in Next were down 2.5 per cent this morning at £78.50, as it also raised concern that pent-up demand from shoppers in 2021 could drop off this year. It also said freedom to spend money on things like foreign holidays this summer could see less spare cash available to spend on clothes.

Rises in energy bills and mortgage rates could also hit spending, it said.

The trading update said: “We were expecting sales growth in Q4 to be weaker than Q3, however, a strong revival in Next branded adult formal and occasionwear significantly improved sales throughout the final period.

“In the run-up to Christmas our stock levels were materially lower than planned.

“We also experienced some degradation in delivery service levels as a result of labour shortfalls in warehousing and distribution networks.

“The fact that our sales remained so robust in these circumstances is, we believe, testament to the strength of underlying consumer demand in the period.

“Our headline sales growth expectations of 7 per cent sounds uncontroversial.

“However, forecasting sales for the year ahead is unusually difficult and the buoyancy of recent months makes it all the harder.

“We are assuming no further disruption from Covid…”

The trading update added: “We have revised our estimates for selling price inflation in the year ahead, mainly as a result of the unanticipated persistence of higher freight rates into the back end of the year ahead, along with some further increases in manufacturing costs.

“In addition to the increases in the cost of our goods, we are also experiencing increases in UK operating costs, mainly as a result of UK wage inflation.”

The FTSE 100 business said surplus cash would be returned to shareholders in the form of dividends and share buybacks.

Joshua Raymond, director at financial brokerage XTB, said: “Given much of the brands revival has come from adult and occasionwear sales, the challenge it will face is whether demand maintains healthy in face of rising prices.

“Certainly despite supply and delivery shortages, demand remained strong over the holiday season..”

Read More Related Articles The long-standing FTSE 100 CEOs at Next, Ocado, JD Sports and elsewhere who have outlasted all their rivals Read More Related Articles Next warns of slower sales in run-up to Christmas Sign up for your free East Midlands newsletter and follow us on LinkedIn

Email newsletters

BusinessLive is your home for business news from across the East Midlands including Leicestershire, Nottinghamshire, Derbyshire and Lincolnshire.

Click through here to sign up for our daily email newsletter and also view the broad range of other bulletins we offer including weekly sector-specific updates.

We will also send out ‘Breaking News’ emails for any stories which must be seen right away.


For all the latest stories, views and polls, follow our BusinessLive East Midlands LinkedIn page here.
Tom PegdenLeicester Mercury business editor