UK retail mood may get bleaker following Next’s holiday surprise

Bloomberg

British shoppers defied rampant inflation and economic gloom over the holiday season, driving up sales at clothing seller Next Plc and budget retailer B&M European Value Retail SA. Whether that spending will carry into the new year, however, remains in doubt.
Next raised its annual profit forecast after Christmas sales gained, helped by a December cold snap that brought customers into stores in search of winter clothing. B&M and baker Greggs Plc also reported recent revenue growth. Next week, results from a range of retailers — from Tesco Plc and Marks & Spencer Group Plc to Asos Plc — will show how widely consumers spread the cheer.
Analysts expect a 23% decline in M&S’s adjusted pretax earnings in the year through March, according to data compiled by Bloomberg.
Asos will also give a business update on January 12, as analysts predict a decline of more than 50% in the online fashion retailer’s annual earnings for its current fiscal year.
UK consumers have to contend with higher prices, soaring energy bills and transport strikes, so it’s encouraging if they chose to keep spending at Next stores over Christmas. But the coming months will get harder with credit card bills coming due and mortgage rates rising while the Bank of England doesn’t forecast inflation to peak until later in the year.
Expectations for UK retailers are so low that even though Next forecast an 8% decline in pretax profit through January 2024, the shares rose as much as 9.3%. Next sees inflation peaking in spring-summer this year and receding in autumn, providing some guidance for when shoppers may finally see prices start to stabilise.
“Let’s hope inflation does come down,” Greggs Chief Executive Officer Roisin Currie said on a media call.