Strong trading at Next’s summer sale as shoppers continue to spend more on clothing than expected has prompted a second profits upgrade at the retailer in just over six weeks.
Next, which has about 550 stores in the UK and Ireland and is considered a good barometer of British consumer spending, said it now expected to make £845m in annual profit, £10m more than previously forecast, as last month’s exceptionally wet weather dampened, but did not snuff out, shopper demand.
The group’s summer sale raked in £4m more in profit than expected while full-price sales have risen by 3.7% in the six weeks since 17 June. While this was a fall back from the 9.5% pace of growth in the seven weeks to 17 June, it was well ahead of the 0.5% rise Next had predicted.
The clothing and homeware retailer said it still expected sales growth to slow to just 0.5% for the rest of the year.
The upgrade comes after Next said in June that warm weather and pay rises for workers in April at the start of the new financial year for many companies had boosted profit hopes by £40m.
Analysts said Next had pulled off a strong performance in a market that had clearly got tougher over the summer.
“Next shows that it continues to deliver in a challenging retail environment,” said Caroline Gulliver, an analyst at Stifel, adding that Next’s move into hosting other brands on its website and some stores appeared to be paying off.
“With inflation showing signs that it is finally starting to fall, Next’s strong brand, multi-channel position and growing platform offering mean it is well-placed to capitalise on an improving consumer environment.”
However, analysts suggested tougher times could be on the way.
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James Grzinic, a retail analyst at Jefferies, pointed to “a reducing willingness by consumers to spend their improving disposable income”.
