High street chain Next reveals better-than-expected quarterly sales

Next held back from raising its full-year profit forecast, saying it now expects sales in its second quarter to fall by 5 per cent, against the 4 per cent previously pencilled in.

It said: “Some of the first quarter’s success, particularly in holiday clothing sales leading up to Easter, might have been pulled forward from the second quarter.”

The group added: “Shareholders might wonder why we are so cautious for sales in Q2.

“As we explained in March, the second quarter last year benefited from unusually warm weather and pent-up demand for events such as weddings, proms etc.”

Richard Hunter, Head of Markets at interactive investor, commented: “In a brief but uninspiring trading update, Next maintained its previous guidance for the year, but downgraded its forecast for the next quarter.

“The guidance is in line with Next’s traditionally cautious outlook, adding to its previous comments that while it sees some improvement to the overall drag of inflation given reduced factory gate prices and lower freight costs, wage inflation and utility bills remain a thorn in the side which will likely impact overall performance.”

"A rebound over the last six months, partly following optimism over the group’s refreshed strategy, as announced at its full-year results in March, has lifted the share price to stand ahead by 6 per cent over the last year, as compared to a gain of 4 per cent for the wider FTSE100.

"The market consensus currently stands at a hold, albeit a strong one, but this dearth of any new positive catalysts is unlikely to put any positive pressure on the general view for now.”

Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, commented: "This is another solid update from the bellwether of the UK high street. Sales have fallen by less than expected, and although Next hasn't increased its full year guidance, this seems to be more out of prudence than anything else.

"Next's strength is allowing it to snap up weaker rival's brands at knock-down prices and plug them into its online distribution network.

"By offering these brands, Next expands choice for customers and gives them even more reasons to keep coming back.

"Overall, Next is doing everything investors could ask of it in a difficult retail environment. Economic pressures could yet worsen as higher interest rates really start to bite. But that won't worry Next too much. It looks to be in a much stronger position than rivals to weather any storm."