SHARES in high-street giant Next have surged today after the retailer lifted its profit guidance for the full-year on the back of higher-than-expected full-price sales in the nine weeks to December 30, helped by a “dramatic” boost in demand when the cold weather struck.

And it declared its end-of-season sale was progressing ahead of forecast.

Next, the first of the major non-food retailers to report on festive trading, said full-price sales were up 4.8 per cent in the nine weeks to December 30, compared with the same period the year before. This was around £66 million higher than previous guidance of a 2% fall for the period.

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The company lifted profit expectations for the full year ending this month by £20m to £860m, up 4.5 per cent compared with last year. This reflected better-than-expected full-price sales in the period, although Next said it remains “cautious in our outlook for the year ahead”. It is guiding on profits falling by 7.6% to £795m for 2023/24.

Charlie Huggins, head of equities at investment firm Wealth Club, and shareholder in Next, said: "This is another impressive performance from the bellwether of the UK high street, reinforcing Next's reputation as one of the best run UK retailers.

“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.”

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Next said it believed the strength of demand for warm clothing in December was “partly a result of pent-up demand from an unusually warm October and November.”

And it reported that its end-of-season sale was “progressing well and clearance rates are ahead of our expectations.”

The retailer now expects cost price inflation on like-for-like goods to peak at around 8% in the spring summer season, but no more than 6% in the second half.

Next said: “This autumn winter figure is only an estimate at this stage, as we are still negotiating prices; but it does appear that cost pressures are now easing through a combination of reducing freight costs and lower factory gate (dollar) prices.”

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Factory gates in the second half will benefit from the decline in the price of commodities such as cotton and polyester, increasing factory capacities because of a slowdown in global demand, new sources of supply, and the devaluation of some local currencies against the dollar.

Next noted that much of the increase in next year’s prices are the result of the devaluation of the pound against the dollar. “Eighty per cent of our contracts are negotiated in dollars so the devaluation of the pound has had a significant impact on our prices,” it said.

Mr Huggins added: “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.”

“Next, and the rest of UK retail, are still facing a very difficult economy in 2023. But if the recovery in sterling is sustained, it will certainly provide some succour. And even if it doesn't, Next looks better positioned than most retailers to weather the storm."

Shares in Next were trading up more than 7% at 6,540.88 around 12.30pm.