Next sales boosted by warm weather and wage growth as price rises set to fall
The retailer said it expects to put up its prices by less than expected over the rest of the year as its business costs come down.
It reported a better-than-expected 5.4 per cent jump in total sales over the six months to July, compared with the same period last year, and a 3.2 per cent increase in sales of its brands at full price.
Its pre-tax profit improved by 4.8 per cent to £420m over the same period.
Next said it underestimated the impact that slowly rising wages and a strong employment market would give its sales.
Average wage growth has been outstripped by price hikes in the UK over recent years but caught up with inflation in the three months to July, according to official figures.
The retailer also said that exceptionally warm weather in late May and June is likely to have boosted sales of its summer clothing at a critical time. But the volume of sales reduced as prices shot up by 7 per cent over the period, meaning that customers spent a similar amount of money on clothing but got fewer items in their basket. Next said it expects prices to rise by about 2 per cent over the autumn and winter season, lower than the 3 per cent increase it had previously forecast, before potentially flattening in the spring of next year. It comes as inflationary pressures continue to ease for the group, with costs such as labour, production and shipping falling faster than expected.
The group lifted its profit guidance for the full year from £845m to £875m and forecast a further slowdown in inflation over the next financial year.
Richard Hunter, Head of Markets at interactive investor, commented: “Next has raised its profit guidance yet again, alongside opening the doors to reveal the very core of its corporate thinking. As such, the numbers themselves are something of a sideshow as Next moved into a deep dive on its strategy, aspirations, growth areas and the wider environment in a lengthy release.
"The scale of its aspirations is far-reaching..All are largely dependent on the technology which it has been busy developing, enabling for example the acquisition of new brands via its website which, although lower margin, are also significantly lower risk.”
"Next has long been regarded as a well-oiled machine and clearly has the determination to drive progress.
"The combination of lower costs and an online offering which continues to prosper underpins financial performance and augurs well for future development of the offering as a whole.
"The shares have more recently seen the benefit of increasing expectations, having risen by 24 per cent over the last year, as compared to a gain of 6.8 per cent for the wider FTSE100. The two-year performance remains negative, however, where the shares remain down by 12 per cent and some way off the peak of £81 achieved in November 2021. Even so, Next has once again shown its credentials for existing and future growth.”