Next Plc said the outlook for UK retail is improving after the clothing retailer reported Christmas-season sales that beat analysts' estimates, driving the shares higher in London trading.

“The economic outlook for the UK consumer looks relatively benign,” and low inflation and stabilising wages “paint a somewhat more positive picture than recent years,” the Leicester-based company said.

European clothing retailers have struggled this year as unseasonably warm weather held shoppers back from adding to their wardrobes. Next, with more than 500 stores in the UK and Ireland and nearly 200 stores elsewhere, said it has been clearing inventory after starting the end-of-season sale with significantly more stock than last year. The shares rose as much as 4.4 per cent. They traded 3.8 per cent higher at 6,760 pence as of 8:48am in London yesterday, bringing the gain this year to 24 per cent. Next-brand sales advanced 2.9 per cent in the October 28th to December 24th period. Analysts expected a 1.1 per cent gain, according to the median estimate.

Revenue at its stores gained 0.5 per cent during the eight-week Christmas period, while sales at its home-shopping business, called Directory, rose 7.5 per cent. The trading update is "better than feared, driven by another impressive directory performance," wrote Richard Edwards, an analyst at Citigroup Inc.

The company said it remains “very cautious” in its sales budgets for next year as the company will face “very tough” comparable numbers.

For fiscal 2016, Next forecast full-price sales growth of 2.5 per cent to 7.5 per cent, while profit is expected to grow in line with revenue.

First-half sales growth will be at the lower end of the range, the retailer said. "Next's business model has again proven to be robust," Simon Bowler, an analyst at Exane BNP Paribas, said in a note to clients.

– (Bloomberg)