Next shares drop as online shopping boost masks high street malaise
Clothing and home products retailer Next managed to balance out falling high street sales with its growing online business, its third quarter trading update showed today.
Store sales for the quarter were down eight per cent year on year and 6.3 per cent in the year to date compared with 2017.
But online sales shot up 12.7 per cent in the quarter to the end of October, and up 14.8 per cent since the beginning of 2018.
Shares fell four per cent on the news as investors saw further evidence of high street decline.
Overall the firm chalked up a two per cent rise in third quarter full price sales, falling behind the 4.5 per cent growth in the first half of the year.
Sales were also boosted by an 11.9 per cent rise this quarter in financial interest income from its 'nextpay' accounts, the credit facility Next offers to its customers.
The retailer reiterated its full-year forecast, with overall full price sales in 2018 expected to grow three per cent year on year, and to deliver £727m of profit before tax, which would constitute flat profits compared to 2017.
Next remained optimistic and said the results were "in line with our expectations".
Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "‘Another trading statement from a high street retailer, another clear example of clicks hammering bricks. Like much of the sector, Next is doing the splits as digital and physical sales head in opposite directions.
"As Next rightly points out, clicks and bricks can be complementary, as physical outlets give customers a convenient place to collect and return items. The scale of Next's finance division business is significant, with £1.1bn of outstanding consumer debt, which is expected to contribute 17 per cent of Next’s profits this year."
Tom Stevenson, investment director of Fidelity Personal Investing’s share dealing service, added: “Next continues to be a beacon of light in a bleak retail sector. But third quarter full-price sales growth of two per cent, bang in line with expectations, was only possible thanks to ongoing strong growth in the retailer’s online and catalogue business and growth in credit income.
"Sales on the high street are declining as fast as everyone else’s as consumers sit on their hands and digital disruption continues to devastate the sector.