BUSINESS LIVE: Next ups profit forecast; JD Sports sales disappoint; Markets rein in rate cut expectations

Next plans to halt price rises for shoppers over the new financial year as its own input costs stabilise for the first time in three years and profits soar.

The fashion and home retailer hiked its annual profit outlook for the fifth time in eight months on Thursday after better-than-expected Christmas sales.

The retail giant saw full-price sales rise 5.7 per cent over the nine weeks to 30 December, with growth of 10 per cent in both of the final two weeks before Christmas Day.

Lindsay James, investment strategist at Quilter Investors:

‘Minutes released from the Federal Reserve last night… dampen the optimism that the market took away from the post-meeting comments by Fed Chair Powell in mid-December, with further mention that rates should stay high for “some time”.

‘Given market expectations around rate cuts were already quite punchy, this confirms that things won’t move as quickly as some would like and it needs to be accepted that the Fed is still very data driven around inflation and the economic data.’

Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club:

‘Next has pulled yet another rabbit out of the hat today, leading to a further upgrade to its full year sales and profit guidance. It has demonstrated once again why it is considered one of the best run retailers around.

‘UK consumer spending appears to have defied gravity. A strong employment market and rising wages have helped cushion inflationary cost pressures, meaning consumers have continued to fill their Christmas stockings with Next’s wares, despite the gloomy economic headlines.

‘Next’s online sales were particularly strong reflecting better stock availability and excellent operational execution. This stands in stark contrast to other retailers like Superdry which have struggled in the prevailing economic environment.

‘The future for Next looks bright and is reflected in the group’s guidance to grow sales and profits again in the year ahead.

‘Next’s core proposition is clearly resonating with the UK consumer and is being augmented by intelligent acquisitions of brands like Fat Face. With inflation falling and wages rising, the economic picture also looks a lot less bleak than at the start of last year.’

Britain’s electric car revolution has been undermined by a lack of charging points.

Just 16,178 public chargers were installed last year – 44 a day, and well short of the 110 needed to hit the Government’s target of 300,000 in the UK by the end of the decade.

The figures come from analysis by the Mail of data from charger locator service Zapmap. They will fuel concerns over ‘range anxiety’ that has left many petrol and diesel drivers hesitant to switch to electric vehicles (EVs)

London-listed stocks are trading higher this morning, led by energy shares that track oil prices higher, while Next jumps to a record peak after the clothing retailer raised its annual profit outlook.

Energy shares have climbed 1.4 per cent to hit their highest in more than six weeks as oil prices extend gains on persisting concerns over Middle Eastern supply disruptions.

Next is the top gainer in the FTSE 100, jumping 5 per cent to an all-time high after the retailer raised its profit forecast for the year ended January 2024, for the fifth time in eight months.

Shares of BP have climbed 1.7% as the oil and gas company terminated agreement with Equinor to sell power to New York state from their proposed Empire Wind 2 offshore wind farm.

JD Sports Fashion has slumped 17 per cent to a two-month low after the sportswear retailer lowered its full-year profit forecast, citing higher costs, a slowdown in consumer spending and subdued demand for apparel amid milder weather conditions.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown:

‘Next’s Christmas trading update gave investors plenty to be jolly about. There was a 5.7% increase in full-price sales over the nine weeks to 30 December, which ultimately led the group to nudge up its profit guidance.

‘Full-year pre-tax profits are now expected to come in £20mn higher at £905mn this year, continuing the group’s hot streak of beating its own guidance.

‘Successfully keeping full-priced sales front and centre to avoid discounts is one of the reasons Next can boast some of the best margins in the sector. But it’s a tricky strategy to nail, especially alongside expanding its online presence and introducing third-party brands to its offering.

‘Unwrapping some of the headline figures, the group’s revenue growth came largely from its online channel where sales grew at near double-digit rates.

Next still has a strong high street presence too, and growth here remains positive. Next also issued some guidance for its new financial year, with pre-tax profits expected to grow to around £940mn.

‘This comes as UK wages look set to rise in line, if not ahead of inflation, and Next’s own cost-price inflation has diminished to negligible levels, which should offer some relief to margins in the new year.’

Tesco and Sainsbury’s have emerged as the biggest winners among British supermarkets this Christmas alongside Aldi and Lidl.

The pair were the only traditional grocers to gain market share over the 12 weeks to December 24, according to data from the industry group Kantar.

Shoppers also flocked to Aldi and Lidl in greater numbers. It came as the industry celebrated its busiest Christmas since 2019, with shoppers spending a record £13.7bn last month alone – or £477 per household.

JD Sports Fashion has cut its full-year profit forecast, citing higher costs and subdued consumer spending that hurt peak season demand.

Softer demand and more promotional activity than expected also dented gross margins in the peak 22-week period ended 30 December.

JD Sports added that its full-year gross margin rate will be slightly lower than last year.

Apparel revenue growth was also impacted by milder weather conditions, JD said.

The company, which sells Nike, Adidas and other sports fashion ranges, now expects profit before tax and adjusted items of £915million to £935million for the year to 3 February.

That is down from a previous expected profit in line with market expectations at around £1.04billion.

When the massive 2,670-passenger cruise ship Diamond Princess was quarantined off Japan in February 2020 following an outbreak of Covid, it became a grim omen of the chaos soon to befall the global economy.

The spread of the virus quickly began to hit the travel sector, with ships held at anchor and passenger aircraft grounded.

Travel restrictions effectively put the industry into stasis as many companies haemorrhaged cash in the form of upkeep costs.

Next has upped its annual profit expectations for the fifth time in eight months after the clothing retailer beat sales forecasts in the final nine weeks of 2023.

The group, which trades from about 460 stores in the UK and Ireland and has an online presence in over 70 countries, did, however, caution that difficulties with access to the Suez Canal, if they continued, were likely to cause some delays to stock deliveries in the early part of the year.

It said: ‘f the £20m increase in profit, £17m came from the £38m sales beat to date, and £3m comes from an upgraded forecast for full price sales in January.’