Shares in Next were up on the FTSE 100 in morning trading after the retailer predicted a rise in pre-tax profit for the year ending January 2011 of seven to ten per cent.
The group said that although trading conditions before Christmas had been "very challenging" it still expected full year pre-tax profit to be in line with current expectations at between £540 million to £555 million.
In the period from 1 August to 24 December Next said that its total next brand sales were up 0.2 per cent, while retail sales declined 3.1 per cent. The fall in retail sales was attributed to "extreme weather conditions and increased competitor discounting".
Next said it believed that the heavy snow at the end of last year could have cost it as much as £22 million in lost sales. The snow did have some positive affects however, with Directory sales rising briefly until demand tailed off thanks to fears that orders would not be delivered in time for Christmas.
In an outlook statement Next said, "The outlook for 2011 is uncertain. The impact of Government cuts on consumer spending is still unclear and we have yet to fully understand the impact of rising retail selling prices on overall demand. We reconfirm that our own prices will be increasing by circa 8% as a result of higher input costs and the rise in VAT. Our best guess is that price rises will moderately suppress like for like sales, though we believe this will be offset by the addition of profitable new Retail space and continued growth of Directory's online business."
Richard Hunter, Head of UK Equities at Hargreaves Lansdown Stockbrokers, commented, "Next has maintained its customary cautious outlook on prospects, despite there being some upbeat trends within the statement.
"Deep discounting on the High Street affected margins in the run up to Christmas, whilst the rise in input costs such as cotton caused the company to reiterate its previous warning that prices could rise by around 8% in the near future. Meanwhile, limited stock availability at stores provided a headwind, whilst looking out the impending age of austerity in the UK will provide further pressure. Given Next's continued strong performance in online sales, a line which is already well established, the mention of bad weather was something of a red herring - the company itself admitted to an overall neutral position following the snow as the Directory business continued its growth path.
"The share buyback scheme has also helped performance, with the company confirming previously estimated profit numbers for the year. This being said, Next's traditionally noncommittal guidance may have been reflected by the performance of the shares, which have underperformed the wider FTSE100 significantly over the last three, six and 12 months (17%, 24% and 15% respectively). In all, whilst there are positives within the statement which may prove positive in the longer term, the current market consensus remains stuck at no more than a hold."
By 09:35 shares in Next were up 1.59 per cent on the FTSE 100 to 2,047.00 pence per share.