Next Plc (NXT) joined John Lewis and House of Fraser in the U.K. Christmas winners column as those retailers with a consistent approach and a compelling multi-channel offer triumphed in the battle for festive business.
Next, the U.K.’s second-largest clothing retailer, raised its full-year profit forecast today after sales significantly exceeded company expectations, sending the shares up 10 percent. Like John Lewis and House of Fraser, which yesterday reported stronger holiday sales, growth was driven by its online business, while Next also avoided the pre-Christmas discounting that led Debenhams Plc to forecast a profit slide.
“Retailers that have been absolutely consistent and aren’t chopping and changing their strategy, like Next and John Lewis, are winning hands down,” said Bryan Roberts, an analyst at Kantar Retail in London. “Next shoppers know there are no pre-Christmas sales, whereas customers have punished Debenhams for its somewhat random sales. Nothing infuriates people more than seeing your item on sale the day after you paid full price.”
The gap between U.K. retail’s winners and losers widened this Christmas, with those that maintained pricing discipline and made it simple for shoppers to collect online orders from their stores coming out on top. Next, the owner of the U.K.’s biggest home-shopping business, stuck to its policy of waiting until Dec. 26 to start its clearance sale, while the likes of Debenhams chased sales with price cuts, eroding profitability.
Discounting before Christmas “just wasn’t a question” for Next, Chief Executive Officer Simon Wolfson said today in a telephone interview. “Ultimately you are competing against your own numbers last year, so if you didn’t discount last year it’s easier not to discount this year.”
Like John Lewis and House of Fraser, Next also cited surging online orders as a reason for its successful holiday season. Sales at the Next Directory unit increased 21 percent, with more customers shopping up to the weekend before Christmas because of increased confidence in online deliveries, the retailer said.
Click-and-collect, where customers order online and pick up the purchase from their local store, was a particular area of growth. About 20 percent of Britons bought items online for in-store collection in the run-up to Christmas, according to a survey conducted by digital-products creator Foolproof Ltd.
More than a third of online orders placed with Next are collected from stores. John Lewis said orders placed through the channel were up 62 percent from the previous year.
“It’s set to become more important as mobile commerce really takes off in 2014,” said Kantar’s Roberts.
Marks & Spencer, which offered discounts of as much as 50 percent just before Christmas, will report flat same-store general merchandise sales, which includes clothing, for the fiscal third quarter, according to the median estimate of 10 analysts surveyed by Bloomberg News.
The U.K.’s largest clothing retailer underperformed the apparel market in the 24 weeks ended Nov. 24, Jamie Merriman, an analyst at Sanford C. Bernstein, wrote in a Dec. 30 note, citing data from researcher Kantar that is not publicly available.
M&S sales grew 0.2 percent in the period, compared with total market growth of 0.9 percent, Merriman wrote. Next gained 5.5 percent.
The U.K.’s main supermarkets may have had a difficult Christmas as more consumers shopped at discounters such as Aldi and upscale chains including Waitrose.
Sainsbury may report a drop in same-store sales, halting 35 consecutive quarters of growth, according to James Grzinic, an analyst at Jefferies International in London. He estimates a decline of 1 percent excluding gasoline in the third quarter, which he said would confirm both a tough backdrop for supermarkets and weakening outperformance versus peers.
Grzinic expects Tesco to report a 2 percent drop in U.K. same-store sales for the six weeks ended Jan. 4.
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