Next Profit Forecast Defies U.K.’s Gloomy Retail Outlook

(Bloomberg) --

Fashion retailer Next Plc posted better-than-expected holiday sales and forecast an increase in fiscal 2021 profit in a welcome boost for the beleaguered U.K. retail market.

Pretax profit will rise 1% to 734 million pounds ($963 million) in the year through January 2021, Next forecast Friday in a statement. An extra week of sales next year may generate additional earnings, the company said.

Considered a bellwether for a U.K. industry beset by online competition and Brexit jitters, the retailer’s upbeat projection and Christmas season may offer comfort to investors.

The report “will come as a relief to the broader sector, providing positive share price momentum for Next and the wider fashion space,” said Adam Tomlinson, a Liberum Capital analyst, in a note to clients.

Next shares were little changed in London trading. Fellow fashion retailer Boohoo Group rose as much as 1.9%, while Marks & Spencer Group Plc fell as much as 1.4%. Next was one of the sector’s best performers in 2019 with a gain of 76%.

Fourth-quarter sales rose 5.2% from the year earlier, ahead of the company’s internal forecast. Next’s online arm continued to drive the business with quarterly internet sales rising 15%. Main street store sales continued to contract, but at a slower rate than the year earlier.

While Christmas was better than expected, conditions are still tough in the retail sector, CEO Simon Wolfson said in an interview. Consumers prioritized spending on experiences rather than “buying stuff,” he said.

Springboard, a retail-data provider, said the number of people entering shops on Boxing Day fell 8.6% compared to a year earlier amid inclement weather. The chain has had a slightly slower-than-expected start to clearance sales this year, Wolfson said in the statement.

To contact the reporter on this story: Deirdre Hipwell in London at dhipwell@bloomberg.net

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John Lauerman, Thomas Mulier

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