Next is the gift that keeps on giving. Not only did the retailer successfully navigate the pandemic without too much disruption to revenue or profits, it has taken the cost-of-living crisis in its stride.
Next’s Full-price sales rose 6.9% in the second quarter compared to the same period last year. Strong performance in the last quarter has given Next’s board the confidence to increase full-year profit before tax guidance by £10m to £845m. A small increase, but an increase nonetheless.
With interest rates set to increase even further, there are concerns the UK consumer will curtail discretionary spending which will impact Next’s sales, so any increased profit guidance will be welcomed with open arms.
Next have set out guidance for a 0.5% sales increase in the second half compared to last year to total a 1.8% increase in sales for the full year.
Next have a history of underpromising and overdelivering and today’s guidance certainly provides the opportunity for Next to beat their own expectations later in the year.
Any improvement in consumer sentiment or cost of living pressures could see Next smash these forecasts. Indeed, analysts at Third Bridge feel these pressures could soon ease.
“Our experts are optimistic about the outlook of Next and other mid-market retailers heading into autumn as inflation eases. Manufacturing and freight costs are coming down rapidly compared to last year,” said Alex Smith, Global Sector Lead at Third Bridge.
“Next has benefited from several big players like Debenhams exiting the market and the decision of John Lewis and House of Fraser to close stores. Next is focusing on larger stores, which can offer more choices to customers and are more cost-efficient to run.”
“One of the challenges for Next’s online business is that customers may be overwhelmed by the choices. Nevertheless, our experts see opportunities for Next’s online brand.”
Next shares were 0.2% higher at the time of writing.