Next brushes off warm autumn weather hit to up profit outlook once again
The fashion chain said weekly sales fell by up to 7 per cent in September during the heatwave that month and were also lower during the first half of October.
Sales bounced back, though, as the colder weather kicked in last month – up 16 per cent and 11 per cent in the first two weeks of October respectively – helping overall sales in the group’s third quarter to lift 4 per cent.
This was better than its previous guidance for growth of 2 per cent in the August to October quarter.
Next said it now expects group underlying pre-tax profits to lift 1.7 per cent over the year to £885m on sales up 3.1 per cent.
This compares with its earlier guidance for profits of £875m and a 2.6 per cent increase in sales. Retailers were hit hard by the unseasonable early autumn weather, with shoppers shunning new autumn lines. Next said sales were “volatile” in its third quarter as a result of the weather pattern, which also saw a cooler than average August.
It said: “We believe the volatility in sales performance is a result of changing weather conditions rather than any underlying changes in the consumer economy. In an autumn season cooler weather is good for sales, warmer than average weather depresses sales.”
The group has repeatedly increased its profit outlook, last raising guidance in September after a 5.4 per cent rise in half-year sales. Its interim results were also boosted by price increases after a 7 per cent increase over its first half, but it said it would slow down price increases – to 2 per cent – over the autumn and winter.
The latest update also comes after Next recently added another retail brand to its growing empire, snapping up high street rival Fat Face last month for £115.2m. It is the latest in flurry of acquisitions by Next, which runs 460 of its own shops, after buying brands including Made.com, Joules and Cath Kidston.
Richard Hunter, Head of Markets at interactive investor, commented: “Even within a brief trading statement, Next was able to pack the punch that it is increasing its profit estimate for the fourth time this year.
“The improved quarterly performance and volatility within its sales performance is one which Next ascribes to changing weather conditions over the period rather than any noticeable change in consumer behaviour.
"Even so, this remains something of an overhang on the retail sector given the uncertain economic outlook, especially for the likes of Next which has eschewed discounting its products in favour of a concentration on full-price sales. The shares are certainly on a roll given its recent ability to confound expectations, and have risen by 40 per cent over the last year, as compared to a gain of 2 per cent for the wider FTSE100. There remains work to be done, though, since the two-year performance remains negative with the shares down by 14 per cent and some way off the peak of £81 achieved in November 2021. Nonetheless, Next has long been regarded as a well-oiled machine with the determination to drive progress.”