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Next leads retailers up
January 04, 2018
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LONDON: Retailers stole the spotlight among UK stocks on Wednesday after Next delivered a strong Christmas update, as the FTSE 100 edged down from record highs.

Britain’s main stock index dipped 0.1 per cent, weighed down by financials stocks and consumer staples.

Next shone, however, jumping 8 per cent to the top of the index after its trading update surprised investors, with a sales beat driving the company to upgrade its full-year profit forecast.

Cheery results from the first UK retailer to report on the crucial Christmas season caused a rally in retail stocks across the market, delivering relief to investors in a sector faced with significant challenges.

Next’s update was in stark contrast to the start of 2017 when the retailer issued a profit warning and its shares sank. Wednesday gain brought it back to November levels before a third-quarter sales miss.

“The Next share price rollercoaster continues,” said Mike van Dulken, head of research at Accendo Markets.

“Management’s update-by-update tinkering of guidance and sharp share price reactions only goes to reinforce how shareholders remain at the mercy of the UK consumer from one season to the next and exposed to short-termism.”

British clothing retailer Next raised its full-year profit forecast after beating guidance for Christmas sales with a helping hand from colder weather, sending shares across the sector higher on Wednesday.

Next shares were up 9.2 per cent at 0851 GMT, while shares in high street rivals Marks & Spencer, Debenhams and Primark owner Associated British Foods gained 2.1, 3.4 and 3.0 per cent respectively.

With Britain’s consumers being squeezed by slow wage growth and the jump in inflation that followed the 2016 Brexit vote, expectations for Christmas spending had been subdued.

Next, the first major listed retailer to update on festive trading, defied the gloom, reporting full price sales growth of 1.5 per cent in the 54 days to Dec. 24, the bulk of its fiscal fourth quarter.

That was ahead of company guidance for a fall of 0.3 per cent and follows third quarter growth of 1.3 per cent.

“We think Next’s (statement) should be a positive read for the UK general retail sector and online retailers such as ASOS,” said RBC Europe retail analyst Richard Chamberlain, who has a “sector perform” rating on Next.

Next Chief Executive Simon Wolfson told Reuters he was “a lot more confident” about the retailer’s prospects than he was a year ago when the company issued a profit warning.


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