'New phase' for Next as firm eyes growth in earnings for shareholders
High street giant Next has upped its annual profit outlook for the second time in less than two months, thanks to surging sales overseas and a rebound in UK trading over recent weeks.
The group, which is led by chief executive Lord Wolfson, reported a 7.1 per cent jump in underlying pre-tax profits to £452 million for the six months to July 27 as total group sales lifted 8 per cent.
It said UK sales rose by just 1 per cent, dragged lower by its Next brand ranges, which saw sales fall as much as 7.4 per cent in June because of poor demand for seasonal collections amid the cooler early summer weather.
But overseas sales surged 23 per cent in the first half, and the firm also said UK trading since the half-year was “materially” better than expected as the weather improved over August.
Next reported a 6.9 per cent rise in full price sales over the first six weeks of the second half so far and it now expects sales over the year to rise 4 per cent overall, with UK retail growth of 5 per cent in the third quarter.
The firm upped its full-year profit guidance by £15 million to £995 million, which would mark an 8.4 per cent rise on 2023-24.
The group also offered some cheer for under-pressure consumers as it said prices were being cut further for its autumn and winter ranges, down 0.3% after a 1 per cent fall in the first six months.
Next said it was entering a new phase thanks to its burgeoning overseas sales and strength in combining online with bricks and mortar shops.
The firm saw like-for-like full-price sales across its high street stores fall 2.2 per cent in the first half, but its online sales jumped 8.4 per cent.
This comes despite cost pressures from a soaring wage bill after big increases in the national living wage, with staff salaries costing it an extra £57 million for the year.
“We enter this new era in a more positive frame of mind with new avenues of growth and a more stable business,” it said.
“Retail sales have stabilised and, though the shift to online may not have run its course, its effects are much diminished, not least because retail is a much smaller part of our business.”
Next said it expects its store numbers to remain largely stable at 455 by next January, down from 458 at the start of this year as it is closes eight sites and opens five.
It said the UK consumer was being boosted by higher wages, which are growing faster than inflation and helping improve spending confidence.
In a chief executive’s review report published alongside the results, Lord Wolfson said the company had entered a “new phase” of its development this year.
He said: “We anticipate delivering 9.7 per cent growth in earnings per share, a number we have not achieved for some time.”
The review said the last 28 years could be thought of as “three distinct eras” for the business. It said between 1997 and 2017, Next delivered “exceptional returns” driven by increasing retail space and online orders.
It said between 2017 and 2024, the retail business shrank while its online sales grew as the firm underwent “a major shift into a very different business”.