Next has again raised its full-year profit guidance after second-quarter sales came in well ahead of its own forecasts, helped by a warm UK summer and a rebound in overseas demand.
The market should expect a sales beat and an upgrade to guidance from Next. Nevertheless, Next shares reacted positively with a 6% jump on Wednesday.
The retailer said full-price sales rose 9.2% in the quarter, more than double the 4.0% it had pencilled in, coming in £70m ahead of forecast.
It put the beat down to UK weather that proved as warm as last year’s exceptional summer, a release of pent-up demand in the Middle East and Northern Europe after a soft first quarter, and greater-than-expected scope to spend on profitable marketing.
As a result, Next lifted its full-year pre-tax profit guidance by £25m to £1,243m, up 7.3% on last year. About £15m of the upgrade came from the extra sales, with a further £10m from a better-than-expected performance by its equity investments. Guidance for earnings per share rose to 812.9p, up 9.2%.
Derren Nathan, head of equity research, Hargreaves Lansdown, said “Hotter than expected weather and a revival of demand in the Middle East and Northern Europe helped Next drive second quarter full-price sales growth close to double digit territory. Internet sales did the heavy lifting, but in-store sales are stabilising falling just 0.2% after a 3.4% drop in the first quarter. The smaller international operation which is online only accelerated to 36.9%.”
In the UK, its LABEL third-party platform grew 13.2% and total UK sales rose 2.8%, though its own-brand online arm dipped 1.2% and retail store sales edged slightly lower.
Next kept its guidance for full-price sales across the rest of the year at up 5.0%, noting that international growth would moderate to around 14% in the second half as it laps a one-off step-up in European stock availability from last August. T
The company also nudged up its planned share buybacks to £524m for the year, of which £355m has been completed at an average price of £127.69.