Next warns impact of tax hikes could hit sales
High street bellwether Next has upgraded its full-year profit guidance after better-than-expected sales, but warned consumer confidence will slow sales in the second half of the year.
Next told markets this morning that total full price sales rose 11.4 per cent year on year in the 13 weeks to April 26.
The sales boost, which Next attributed to the early sales of summer clothes during the warm weather this spring, totalled £55m.
Online sales, which account for around a third of Next’s total sales, grew by 8.9 per cent in the UK and 29.6 per cent internationally.
Retail sales in the UK grew by 5.2 per cent in the first quarter, taking overall UK growth to 7.3 per cent.
As a result, the company increased its guidance for profit before tax for the full year by £14m to £1.08bn.
Next kept its sales guidance the same, however, describing first-quarter sales as an “overperformance” with sales pulled forward from the second quarter, rather than a long-term uptick in demand.
The FTSE 100 firm said it was “more cautious” about sales later in the year because “the full effects of this April’s National Insurance increases will begin to filter through to the wider economy in the second half”.
The higher employer’s national insurance is widely expected to cut retail employment and increase prices as businesses grapple with higher costs.
The chief executive of the British Retail Consortium (BRC), Helen Dickinson, has warned that economic uncertainty will make it more difficult for businesses to pass on higher wages and other costs to customers.
Next expects full price sales to rise six per cent in the full 2024/25 financial year, after rising 12.2 per cent last year.
It expects sales growth to fall to 3.5 per cent in the latter half of the year, after growth of 8.8 per cent in the first half.