Next has increased its profit guidance by £5m to £1.01bn due to ‘over-achieving’ during the nine weeks to 28 December. Sales for the period were up +6 per cent, compared to previous guidance of +3.5 per cent, partly driven by ‘unexpected’ sales growth overseas in the run-up to the holiday period. In the UK, online sales increased at the expense of retail stores.
Looking ahead Next has warned that ‘UK growth is likely to slow, as employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy’. It is expecting the cost of wages to increase by £67m, but is hoping to offset £13m by raising prices and another £23m by improving operational efficiencies.
The latest figures from the British Retail Consortium show that UK retail sales grew modestly in December 2024 from 1.9 per cent to 3.2 per cent, but:
“The later timing of Black Friday in 2024 meant it fell into December, rather than November figures, while the reverse was true in 2023. This artificially worsened November figures and improved the December figures. This effect cancels out for the ‘three month to December’ figure”.
The figures also show that online sales continue to grow as retail declines. For the year, non-food sales dropped by 1.5 per cent.
Commenting on the data, KPMG Retail Sales Monitor, Julie Palmer, Partner at Begbies Traynor, said:
“As we start the new year, the retail sector must be bracing itself for another highly challenging 12 months after the all-important ‘Golden Quarter’ failed to deliver for a sector that was pinning its hopes on a bumper trading performance over the festive period.
“Sadly, the latest figures highlight how the sector delivered negligible growth in the final quarter leaving many in a very difficult position as we enter 2025. To make matters worse, the tax burden faced by retailers is set to increase at a time when many of the operators are struggling to keep in the black.
“Indeed, with forecasts pointing to lacklustre growth in 2025, we cannot expect sales to outstrip inflation meaning prices are likely to go up; something many consumers will balk at, so one has to question whether the situation could spiral even further downwards.
“So, unless something drastically improves the outlook, I expect to see significant store closures, redundancy programmes and widespread insolvencies across the UK retail sector in 2025.”
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