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UK Retailers Fared Better Than Expected After a Tumultuous Holiday

The John Lewis Partnership and Next Plc., two major retailers in the United Kingdom, have released the first sales numbers to come out of the holiday season—and the early signs are positive for an embattled U.K. retail sector.

There were more store closures in the U.K. over the first half of 2018 as there were in all of 2017  and predictions for the holidays were dire from high street analysts. However, retailers like John Lewis and Next released their numbers in the first week of the new year—and both had good news for investors.

Next Plc., a multinational clothing retailer based out of Enderby, Leicestershire, and the second largest clothing retailer by sales volume in the U.K. (though Primark may be primed to overtake its position this year), issued a trading statement on Thursday guiding investors to remain optimistic on sales after a “disappointing” November.

The retailer said full price sales for the holiday trading period (Oct. 28 to Dec. 29) were up 1.5 percent over 2017 and in line with trading guidance the company gave in the previous quarter. Next may have been saved by online sales that exceeded its estimates by 2.2 percent, totaling 17 million pounds ($21.48 million) in revenue, considering retail sales were down 1.7 percent compared to guidance of 16 million pounds ($20.22 million).

Full price sales for Next’s retail locations were down 9.2 percent compared to the previous holiday period while full price sales online ballooned 15.2 percent. Next anticipates this trend will continue going forward, as the high street evolves with the rise of e-commerce in U.K. retail. It predicted that retail sales will continue to fall in fiscal 2019, estimating a loss of 8.5 percent, with online growth expected to rise 11 percent in the same time frame.

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The story is similar at the John Lewis Partnership Group. The company policy is to be “never knowingly undersold” and the retailer typically has discounts to back that up. Total sales for the week of Christmas were up 4.5 percent over last year, helped by a 10.7 percent increase in fashion revenue, particularly in women’s cashmere, the company noted. Additionally, women’s accessories were up 21.5 percent and beauty was up 25.3 percent over the week.

Thanks to its discounting policy, however, analysts in the U.K. have remained skeptical of the retailer’s profitability during the holiday season. Retail Analyst, Nick Bubb, tweeted that, although like-for-like sales were up 2 percent during that period, the rise was “driven by discounting” and could still lead to poor results at year-end.

Both retailers were buoyed by a late-Christmas shopping surge that counteracted weeks of disappointing sales in the month prior, suggesting that shoppers had simply delayed their spending rather than opt out of it altogether.

The London Designer Outlet, a semi-outdoor shopping center in London, also released guidance on holiday numbers this week. The company had its best week of trading since opening in 2013—thanks to footfall that increased 8 percent compared to 2017. Footwear was the notable winner in sales, growing 14.4 percent, year-over-year, and like-for-like revenue was up 1.5 percent. Overall, the outlet center claimed a revenue increase of 2 percent for the Christmas period.