Cost-of-living crisis? What cost-of-living crisis? This is certainly the impression Next’s half-year report gave on Thursday.
Next shares were 2% higher in early trading on Thursday after the high-street bellwether said profit before tax rose 4.8% to £420m in the first half.
Shaking off any concerns about the health of the consumer, Next also increased its full-year profit before tax guidance increased from £845m to £875m. This constitutes a 0.5% increase on the last full year.
“Next has pulled another rabbit out of the hat today, leading to a further upgrade to its full-year sales and profit guidance,” said Charlie Huggins, fund manager at Wealth Club.
“UK consumer spending appears to have defied gravity. A strong employment market and rising wages have helped cushion inflationary cost pressures, meaning consumers have continued to spend, despite the gloomy economic headlines.
“Not all retailers have benefited, as the travails of Wilko show. Next has capitalised by doing the simple things well. Once again its operational execution continues to outshine almost all of its competitors.”
Although Next’s increased sales will play a major part in meeting its full-year profit guidance, the company has successfully reduced costs and streamlined its online business which will help the bottom line through the rest of the year.
“If you have an idea of the challenges on the horizon, it’s possible to put your business in the right shape to survive. That seems to be Next’s approach, as it has benefited from focusing on key cogs in the business to navigate the difficult market environment,” said Russ Mould, investment director at AJ Bell.
“Broadening its product offering, making sure the online service is as efficient as possible and keeping a sharp eye on costs have all been key focal points and Next has come out on top. These factors and steady demand from customers have enabled it to raise profit expectations.”