Next sales get Easter and Royal Wedding boost

The fashion retailer, which runs over 520 stores in Britain and Ireland as well as the Directory home shopping business, said today that total sales rose 5.2 per cent over the 13 weeks to April 30, its fiscal first quarter.

That compared with company guidance for first-half sales in a range of down 0.5 per cent to up 2.5 per cent.

Next estimated at least 2.5 per cent of the over performance came as a result of hot Easter weather and spending in anticipation of the four-day Royal Wedding holiday weekend.

The company raised its guidance for first-half sales to growth of 1.5 to four per cent, adding gross margins and costs remained well controlled and in line with internal budgets.

Next said it remained cautious on the outlook for 2011 as there had not been a significant change in the underlying economic environment.

It has forecast full year sales growth of 1-4 per cent, which would give pretax profit of £535m to £585m.

Next shares, which had risen 11 per cent over the past month, were up four per cent at 2,311.5 pence this morning, valuing the business at £3.9bn.

“Today’s first quarter update is surprising good,” said Arden Partners analyst Nick Bubb.

A raft of British retailers have issued profit warnings over the past month as the economic outlook has darkened, with consumers worried about government job and welfare cuts, inflation, muted wage growth, a stagnant housing market and the prospect of higher interest rates.

Retail sales were better than expected in April, a survey by the CBI business lobby found yesterday.

However, the survey said retailers expected sales in May to be their worst since September 2009, once the time of year was taken into account.

Retailers have also been facing significantly higher input costs, such as rising commodity prices, especially cotton, and wage rate inflation in the Far East.

Unlike rivals such as Primark and Hennes & Mauritz, but in common with companies such as Debenhams and Marks & Spencer, Next has been passing on the higher input costs to customers, with average selling prices up about six per cent.

Last month, Primark said it would take a hit to profit margins to maintain price leadership in clothing, while in March H&M missed first-quarter profit and sales forecasts.

Next said it expected price rises of about eight per cent in its second half.