Next increases profit guidance

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Fashion retailer Next upped its full-year profit guidance by £25m today after better-than-expected first-half sales, leaving it on course to extend its lead over Marks & Spencer.

The group overtook its more-established rival with a £695m profits haul earlier this year and said it was now on course to lift this to between £775m and £815m - with analysts expecting M&S to make £663m.

Shares rose after Next said sales for the first half to July 26 were 10.7 per cent ahead, with 2.4 per cent coming from new space.

Retail sales rose 7.5 per cent- though this increase was slower in the second quarter than the first. The group’s catalogue and online division boosted revenues by 16.2 per cent, including a stronger second quarter.

The company said sales were ahead of its 5.5 per cent to 9.5 per cent full-year guidance and that it was raising this range to seven per cent to 10 per cent

Next said the guidance “might appear overly cautious” but pointed out that the first-half performance compared with a period last year when sales were hampered by very cold spring and Easter weather.

It said the final quarter of the year would be a “challenging comparison” and guidance for the next six months was for sales growth of four per cent to 10 per cent.

Next also said it was continuing to return cash to shareholders, following special 50p dividends in February and May, with a third being paid this week, though no more are anticipated in the current year.

It means the group has now paid or declared £223m of special dividends and also returned £105m through share buybacks, in the year so far.

Last month, Next was hit with the resignation of long-serving executive Christos Angelides. The product director, who has played a key role during three decades with the firm, is leaving to join US retailer Abercrombie & Fitch.