Another one? Next hikes profit guidance again as sales soar ahead of expectations
Clothing retailer Next has ramped up its profit guidance again today after its sales soared in its first half of the year.
The London-listed high street darling, which outperformed expectations in its first quarter, said it now expects its profit for the year to reach £980m, some £20m more than the group had previously predicted and an increase of 6.7 per cent on last year’s figure.
This is the eighth time in a row that Next has upgraded guidance in its market updates.
It comes after Next saw its total sales increase by eight per cent in the six months ending August 1, driven by a 4.4 per cent rise in its full price sales. Bosses said this was down in part to its acquisition of the clothing brand Fat Face and an increase in its shareholding in Reiss to 51 per cent.
The group’s online sales increased by 8.4 per cent during the half, with overseas orders growing by 22.8 per cent on the same period last year.
The retailer said this strong performance was despite predictions that overall sales would be down 0.3 per cent from the first half of last year when “exceptionally favourable weather” triggered strong demand for its clothing.
In a statement this morning, Next said: “We are maintaining our guidance for full price sales in the second half to be up 2.5 per cent versus last year.
“This might seem cautious when compared with the performance in the first half, which was up 4.4 per cent. However, when compared to two years ago growth in the first half and the forecast for the second half are almost identical.”
Next yesterday announced a buyback of 11,600 of its own shares at prices ranging between 9040p and 9176p per share, as part of a previously announced buyback program.
Following this buyback, Next’s remaining share capital totals 126,008,318 shares.
Analysts: Next ‘still in great shape’
Commenting on Next’s trading statement, Julie Palmer, partner at Begbies Traynor said: “True to form, Next has once again beaten its own expectations to deliver a healthy 3.2 per cent increase in sales, compared to the 0.3 per cent drop the retailer had anticipated.
“As expected, Next has experienced softer trading in the UK, with sales up just 0.4 per cent, driven by the recent wet weather that has dampened trading across the sector.
“However, this slowdown should not ring alarm bells for the market as the FTSE 100 stalwart still looks in great shape at a time when many smaller peers are struggling.
“While today’s performance has clearly been lifted by the 21.9 per cent rise in overseas sales online, the easing of inflationary pressures coupled with a notable rise in consumer confidence should provide a welcome boost to sales in the UK and encourage customers to fill their baskets again.
“As many retailers have shown, the current climate is not easy to navigate, especially with less pricing power and ever-changing demand. Yet Next’s ability to strengthen and adapt both its online and bricks-and-mortar operations has meant it continues to thrive as it heads towards another year of record profit.
“Looking ahead, Next will be hoping the warmer weather continues and that interest rate cuts are on the horizon.
“Fortunately, the retailer has an impressive track record of resilience and adaptability that puts it in prime position for a rebound in consumer spending.”