John Lewis and Next enjoy bumper Christmas

John Lewis and Next are celebrating after enjoying stronger trading than expected over the crucial Christmas period. The two companies are the first major retailers to release results for the festive period, and both provided evidence that consumers have defied the recession. Next has raised its profit expectations for the current financial year after beating its own sales targets. The high street and catalogue retailer said this morning that sales in the run-up to Christmas were better than it had forecast last autumn. "The consumer environment was more stable than expected, with only modest falls in employment, low inflation and continuing low interest rates," said Next, adding that its home merchandise performed particularly well. Next also said that trading was "markedly stronger" in the last two weeks of December as the weather turned colder. The picture was also bright at John Lewis, which just enjoyed its best Christmas ever . It posted four weeks of £100m-plus sales, including a record-breaking £112m in the week before Christmas. "John Lewis is definitely one of the Christmas winners," said its director of selling operations, David Barford. "We have never achieved this level of trading in December before. People can only take so much bad news and this Christmas they wanted to shop." The partnership, which is owned by its staff, said it enjoyed like-for-like sales growth of 12.7% in the five weeks to 2 January. Like Next, John Lewis also reported strong demand for home furnishings. Its Waitrose division is the country's fastest-growing supermarket, with like-for-like sales up 9% in the past 13 weeks. Public deficit threat Overall like-for-like sales at Next's high street stores rose by 3.2% between 26 July and Christmas Eve, although this falls to 1.6% if direct sales made over the internet are stripped out. Catalogue sales through its Directory arm rose by 6.8%. Next now expects to make a profit of between £490m and £500m in the year to 31 January 2010, up from an earlier estimate of £472m. Analysts said that Next did a good job of controlling its stock levels, meaning it had less need to slash prices. "Management also indicates that despite the higher than expected volume throughput, costs have been tightly managed," said Matthew McEachran of Singer Capital Markets. Next admitted that it is "particularly hard" to judge the outlook for the next year. There are reasons to be optimistic – for example, the sharp cuts in interest rates have helped people to service their debts, resulting in a "marked decline" in the number of Next customers falling into arrears. But Next, whose chief executive Simon Wolfson is a Conservative party supporter, is also concerned about the state of the UK's finances. "The scale of the public sector deficit poses a real threat to recovery," declared Next. It predicted higher taxes, cuts in government spending and higher inflation – leading to higher interest rates – in 2010 and beyond as politicians take action to reduce the deficit.