Next (Other OTC: NXGPF - news) has increased its profit forecasts for year after the FTSE 100 (FTSE: ^FTSE - news) fashion retailer kicked off the Christmas reporting season with a solid rise in sales.
Last January, Next gave the first clue that Christmas had been challenging for the high street by warning of “disappointing sales”.
However, against the relatively weak comparatives, Next has suggested that Christmas 2012 may have been better for the beleaguered high street.
Stock for its traditional end of year sale fell by 8.2pc compared to last year because the retailer bought fewer supplies and sold more products in the run-up to Christmas.
This means Next sold fewer of its products at marked-down prices, prompting an increase in margins and its forecasts for annual pre-tax profits from between £590m and £620m to between £611m and £625m.
Lord Wolfson, chief executive of Next, said: “There was definitely less panic discounting [on the high street]. Last year people went for full-blown sales before Christmas.”
He said that Next had been “more cautious” in its stock management compared to last year.
Shares in Next rose by 81p, or 2pc, to £38.53 following the update.
Freddie George, analyst at Seymour Pierce, said: “The company was one of the winners over Christmas helped by a strong range geared to the colder weather.”
Next is the first of the listed retailers to report Christmas trading figures. Rivals Marks & Spencer and Debenhams (Other OTC: DBHSY - news) are scheduled to update the market next week, along with supermarkets Wm Morrison, J Sainsbury, and Tesco (Other OTC: TSCDY - news) .
John Lewis, the department store group owned by the John Lewis Partnership, has already reported a 13pc rise in like-for-likes sales for the five weeks to December 29.
Lord Wolfson said there had been no dramatic change in consumer confidence in the final quarter of 2012 and predicted that 2013 will be “subdued but steady”.
He added: “My feeling is that the last quarter won’t have been that different from the previous three quarters because the economy hasn’t changed much.”
However he believes the "worst has passed" for retailers. "In our sector, particularly in clothing, I don’t anticipate any of the major players leaving the market this year," he said.
Next’s growth was driven by online sales which now account for a quarter of the business with sales from its 500 UK stores up by 0.8pc.
The performance in store sales was an improvement on the 2.7pc drop reported in the January trading update last year.
However, that update covered the longer period of August 1 to December 24.
For 2013, Next has forecast an increase in sales of between 1.5pc and 4pc, with profits increasing by a similar amount.