Next & Morrisons defy downturn as sales rise


The recent spells of hot weather have led to stronger than expected sales at Next, leading the fashion retailer to raise its full-year profit forecast.

Full-price sales for the 14 weeks to 7 May rose 6 per cent, and Next lifted its profit forecast from £705m to £717m.

However, the drift away from the High Street continued, with store sales down 4.8% while online sales jumped 18.1%.

Separately, supermarket chain Morrisons also reported better-than-expected sales growth for the past three months.

Morrisons said group like-for-like sales, excluding fuel, rose 3.6% in the 13 weeks to 6 May, the 10th consecutive quarter of growth.

Cautious approach

Shares in Next jumped nearly 8 per cent in response to the trading update.

Despite the strong performance in the quarter, Next warned that it followed a weak performance a year ago, and that it did not expect to see similar rates of growth across the rest of the year.

Nicholas Hyett, equity analyst at Hargreaves Lansdown, said: “Few retailers would go to the lengths Next has to play down what are undoubtedly strong results, especially when UK retailers are facing such a tough environment. But there’s method in the madness.

“If, as Next seems to believe, the strong first quarter reflects shoppers pulling forward their summer purchases to take advantage of the recent warm weather, then Q1’s positive results will come largely at the expense of later quarters.”

Sales at Morrisons have now risen for 10 quarters in a row, as the recovery at the UK’s fourth biggest supermarket chain continues.

The company said retail sales had risen by 1.8% while its wholesale business also saw sales grow by 1.8%.

Morrisons said it was “now open for business as a wholesaler”, and had started supplying its new partner McColl’s during the quarter.

Chief executive David Potts said: “We are pleased to have made a strong start to the year, again becoming more competitive for customers while delivering growth on growth. We expect to continue to improve in the year ahead.”

The company made no mention of the planned merger between Sainsbury’s and Asda – the UK’s second and third largest supermarket chains – which was announced last week.

“With the Sainsbury’s-Asda merger hogging the limelight, Morrisons’ welcoming Q1 results this morning illustrated why it may also be an attractive target for investors and large conglomerates alike,” said Thomas Brereton, retail analyst at GlobalData.

“Recent news regarding a botched Amazon approach for Waitrose shows that the US online behemoth has its eye on the UK market – and Morrisons may be a viable target, given its already existing ‘Amazon at Morrisons’ delivery partnership.”