But the company also forecast lower profit in the 2023/24 financial year on the back of rising costs and uncertainty over just what consumers will do this year. It expects full-price sales to be down 1.5% and profit to drop 7.6% to £795 million. 

GETTING DOWN TO DETAIL

Looking in more detail at full-price sales for the nine-week festive period and for the entire second half to 30 December, both Online and Retail (that is, physical stores), beat its full-price sales expectations, with Retail being “particularly strong”. That echoes a number of other retailers, who’ve said physical stores have bounced back surprisingly well, despite fears that British consumers had permanently shifted to an online-first mindset.  

“We think that we underestimated the negative effect Covid was having on our Retail sales last year,” Next explained. “We may have also underestimated the effect improved stock levels would have on both businesses”. Stock levels were very low last year as a result of major supply chain disruption.

In Q4 so far, full-price Online sales are up 0.2%, although in the second half so far they’re down 0.9%. Retail sales meanwhile have risen 12.5% in the nine weeks and 7.5% in the first five months of the second half. That means total full-price product sales rose 4.7% in the nine weeks with a 5.8% increase in finance interest income helping to boost the final full-price sales figure to the aforementioned +4.8%. And in the second half so far, the combined impact of Online and Retail sales means total full-price product sales were up 2.2%. With finance interest income being up 7.9%, the final figure came to a 2.5% increase.

The chart below shows the Q4 weekly performance versus last year, the green line giving the cumulative performance for the quarter. It all demonstrates “the dramatic boost to sales we experienced when the weather turned cold in December. We believe that the strength of demand for cold weather products was partly a result of pent-up demand from an unusually warm October and November”.

Of course, the company has only discussed full-price sales so far, so what about clearance items and how much of an impact might they have on the bottom line? That’s not completely clear yet but Next did say it has a lot more sale stock this time than it had in the same period pre-pandemic and the end-of-season sale is “progressing well and clearance rates are ahead of our expectations”. 

It added that markdown stock and sales have been “much higher than last year, mainly as a result of the exceptionally low surplus stock levels last year”. But while it has more available for clearance this time, stock levels have been a little higher than it would like, so It’s planning for the overstock to be corrected in the year ahead.

Overall, planning for the next financial year is a tough task given widespread uncertainty. But the company expects cost price inflation on like-for-like goods to peak at around 8% in SS23. And it expects inflation to be no more than 6% in the second half.  

“This [Aw23] figure is only an estimate at this stage, as we are still negotiating prices,” it added. “But it does appear that cost pressures are easing through a combination of reducing freight costs and lower factory gate [dollar] prices”.

The company intends to maintain its bought-in gross margin percentage. So inflation in its like-for-like selling prices will be broadly in line with the increase in cost prices, that is, 8% for SS23 and 6% for AW23.

Next will announce its full-year results on 29 March.