Next celebrates Christmas sales surge

5th Jan 2010 07:04

High street retailer Next has increased full-year profit forecasts again after enjoying better than expected sales in the run up to Christmas.Sales for the 22 weeks from 26 July to Christmas Eve jumped 4.6% at Next Retail and by 3.2% on a like for like basis, including direct sales, and by 1.6% excluding them. Next Directory upped sales by 6.8%. Stores did especially well in the final two weeks as the weather turned colder, said the group, which thanked only modest falls in employment, low interest rates and inflation, and better product ranges.It now predicts profits for the year to 31 January 2010 will be between £490m and £500m, better than the £472m forecast in November. It includes about £7m of additional profit due to the year being 53 weeks. Earnings per share are seen at between 180p and 184p. The lower end would be a record for the business and an increase of 15% on last year. But Next worries about the impact on the consumer of government attempts to get the budget deficit under control, including tax increases, spending cuts and potentially higher interest rates.'Given this level of uncertainty, we remain cautious in our outlook for the year ahead and are planning accordingly,' it said. Next Retail like-for-like sales, excluding direct sales, are estimated to be in the range of +1% to -3%, and Next Directory sales to grow by between 0% and +2%.'In this scenario we believe we can deliver a similar profit to that of the current year, despite the effect of rising VAT and the loss of the 53rd week,' added the firm. 'In the event that sales are better than our planning base we have the ability to chase stock into the business and to continue to grow group profit. We believe Next is well placed to face the challenges of the year ahead.'Ambrian thinks the market should take this latest upgrade positively. 'We see scope for the company to continue to do better than guidance and therefore our target price of 2,565p looks achievable,' says the broker.'The valuation is low and cash generation during a recession was particularly pleasing.'