Next: Retail giant increases outlook after sales boosted by weather and M&S woes
Next has increased its annual sales and profit outlook after it recorded better-than-expected trading thanks to hot weather and the disruption at its rival Marks & Spencer caused by a cyber attack.
The womenswear and homewares chain posted a 10.5 per cent rise in full-price sales for the second quarter to July 26, with growth of 10.9 per cent for the half-year as a whole.
In the UK, sales jumped by 7.8 per cent in the second quarter as the group said it was boosted by “better than expected weather and trading disruption at a major competitor”.
M&S had to suspend online trading for nearly two months from mid-April after it was hit by a major hack.
Next said the recent performance and forecasts for better-than-forecast second half trading means it now expects full-year sales to rise by 7.5 per cent and for profits to increase by 9.3 per cent to £1.11bn.
It had previously pencilled in sales growth of 6 per cent and for profits to lift by 6.8 per cent.
The upgrade marks the group’s third in just five months.
But Next said it “remains cautious for the second half”, stressing that the improved outlook is for its international arm over the next six months.
It said: “In the UK, we believe we exceeded expectations in the second quarter as a result of better summer weather and trading disruption at a major competitor.
“We do not expect either of these factors to have a material effect in the second half, and so we are not increasing our guidance for UK sales in the second half.”
It believes sales growth in the UK will slow sharply to 1.9 per cent as the jobs market starts to falter following the Government’s move to hike National Insurance contributions for employers, at the same time as rising the minimum wage.
Next said: “We expect UK employment opportunities to continue to diminish as we enter the second half, with the effects of April’s National Insurance changes continuing to filter through into the economy as the year progresses.
“We believe that this will increasingly dampen consumer spending as the year progresses.”
But an online marketing push for its international arm is bearing fruit, helping drive sales 28.1 per cent higher in the first half and with growth of 19.4 per cent now expected in the final six months.
The results come after Next announced late on Wednesday that it had bought Seraphine – the maternity fashion firm, whose clothes were worn by the Princess of Wales during her pregnancies – after it recently collapsed into administration.
Next paid £600,000 for the brand and announced it was bringing back Seraphine’s founder Cecile Reinaud as an adviser to help relaunch the fashion label.
Richard Hunter, Head of Markets at interactive investor, said the “Next naysayers..have been dealt another blow, as the group continues to fire on all cylinders”.
He added: “Next now has the reputation of a company which under-promises and then over-delivers and this update is no exception.”
He continued: “In addition, the numbers underline the group’s unparalleled understanding of the market in which it operates and its ability to capitalise on new opportunities, such as the potentially exciting opportunities in the international business. The group believes that international tastes in clothing are beginning to converge, not least of which is due to the increasing visual power, appeal and presence not just of the internet, but also the rise of streaming services which are now increasingly used by younger audiences.”