Next and Greggs both report rising sales in Christmas period – business live

Key events

UK discount retailer B&M sales rise in Christmas quarter

Discount retail chain B&M says it too had a strong Christmas, and announced a special dividend for shareholders.

B&M has reported that its revenues grew by 12.3% year-on-year, in the 13 weeks to Christmas Eve.

That included a “very good performance” across all its UK sales categories, both in grocery and general merchandise, with “excellent sell-through in key general merchandise ranges supporting improved gross margin performance”.

It suggests that shoppers were seeking out value options amid the cost-of-living crisis. B&M sells a wide range of good at relatively low prices, such as furniture, toys, DIY products and gifts.

B&M CEO Alex Russo says the company has ‘exited the quarter’ well:

“Our strong momentum throughout the Golden Quarter across the businesses demonstrates the strength of our unchanged strategy to relentlessly focus on price, product and excellence in retail execution.

Despite the challenging macroeconomic environment, we will continue to work hard to help both existing and new customers manage the cost-of-living crisis.

B&M intends to declare a special dividend of 20.0p per ordinary share to be paid on 3 February 2023, to shareholders on its register at 13 January 2023.

Next results: what the experts say

Next has reinforce its reputation as one of the best-run UK retailers, by reporting an “impressive performance” in the Christmas period, says Charlie Huggins, head of equities at Wealth Club:

The group benefited from a cold snap in December, which has boosted demand for winter clothing, as well as the absence of pandemic restrictions, aiding store performance. Nevertheless, this shouldn’t take away from Next’s stellar execution. Many other retailers have struggled in the current environment, but Next’s proposition is clearly resonating with the UK consumer.

Looking ahead to the next year, the environment is set to get tougher still. Next’s sales are expected to fall modestly, with profits down close to 10%, as cost pressures take their toll. That said, this outlook is not as bad as it could have been at the time of the disastrous mini-budget, when sterling was in the doldrums.

Richard Lim, CEO of Retail Economics says there is “festive joy” at Next last Christmas, but warns that 2023 will be tough:

Retail analyst Nick Bubb is struck by Next’s prediction that profits will dip by 7.6% over the next year:

Well, the highly respected CEO of Next, Simon Wolfson, is often said to be too cautious with his guidance, but even by his standards it is surprising to see him forecast that Next’s profits will fall back by c8% in the new-year, despite reporting stronger than expected Christmas trading…

Greggs grows sales as vegan options increase

British baker and fast-food chain Greggs is also reporting a jump in sales this morning.

Greggs’ like-for-like sales grew by 18.2% in the last quarter of 2022, which lifted its total sales for 2022 to £1.51bn.

Demand for Greggs’ seasonal lines was high, it says, such as its Festive Bake, a vegan alternative, Sweet Mince Pies and festive hot drinks such as the Salted Caramel Latte.

Plant-based foods are “contributing more significantly” to Greggs’ range, it says, citing new hot options such as a Vegan Festive Baguette.

Greggs also cautioned that it continues to see material cost inflation but says it’s confident of making good progress in 2023.

Chief executive Roisin Currie says longer trading hours, and its move to digital sales, also boosted demand.

“I am proud of the progress Greggs made during 2022 in challenging conditions. Our teams did a magnificent job serving customers and managing the growing demand for Greggs products as we expand our shop estate and offer greater availability through digital channels and longer trading hours, whilst continuing to extend our menu to offer more choice.

“We enter 2023 in a strong financial position that will enable us to invest in shops and supply chain capacity to bring Greggs to even more customers across the UK. While market conditions in 2023 will remain challenging, our value-for-money offer of freshly-prepared food and drink is highly relevant as consumers look to manage their budgets without compromising on quality and taste.”

Introduction: Next sales in the Christmas period beat expectations

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Retail chain Next has beaten sales expectations for the crucial Christmas period, in a sign that consumer spending may have been stronger than feared.

In the first Christmas trading update from a major retailer, Next reports that “sales in the Christmas period have been better than we anticipated”.

Full price sales over the nine weeks to 30 December were up +4.8% versus last year, Next says – around £66m better than its previous guidance of -2.0% for the period.

Cheered by this outcome, Next has lifted its guidance for full-year pre-tax profit by £20m to £860m, which would be 4.5% higher than last year.

But, Next has also forecast lower profits for the 2023-24 financial year, citing uncertainty over the consumer outlook and cost inflation.

It says:

We remain cautious in our outlook for the year ahead. Initial guidance for the year ending January 2024 is for full price sales to be down -1.5% and profit before tax to be £795m, down -7.6% versus the current year.

Next says that both Online and Retail exceeded its full price sales expectations, with Retail being particularly strong, despite the squeeze on household incomes, adding:

We think that we underestimated the negative effect COVID was having on our Retail sales last year.

Next also reports that its end-of-season Sale is “progressing well”, revealing that sales stock is 60% higher than last year – and 31% above pre-Covid levels.

“Markdown stock and sales were much higher than last year, mainly as a result of the exceptionally low surplus stock levels last year,” it says.

Rail passengers face a third consecutive day of travel disruption today due to a train drivers strike

Members of the Aslef union at 15 rail companies will strike, in a long-running dispute over pay, meaning some areas will have no trains all day.

The action follows a 48-hour strike by members of the Rail, Maritime and Transport union (RMT) which led to widespread disruption across the country yesterday.

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