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Next has raised its profit forecast for the third time in four months after customers bought more clothes than expected and the UK fashion retailer’s own cost pressures eased.
The company said on Thursday that it expected pre-tax profit for the full year to be £875mn, up from an earlier forecast of £845mn.
The revision follows an upgrade in June when Next said a combination of warmer weather and wage inflation had helped drive sales. Next said on Thursday that exceptionally warm weather in May and June was also likely to have contributed to higher than expected summer clothing sales in the first half of this year, and that this had to be considered when forecasting for next year.
It is a change in tone from March when Next warned it expected cost of living pressures to hamper this year’s sales and for inflation to hit costs further. Both factors have had less of an effect than predicted.
Lord Simon Wolfson, the Conservative peer and longest-serving FTSE 100 chief executive, said the group had been “overly cautious about the prospects for sales in the current year”.
“We underestimated the support nominal wage increases, and a robust employment market, would give to our top line,” he added. UK wages climbed at the fastest pace on record in the three months to July.
Shares in Next have climbed about 20 per cent so far this year, outpacing a 2 per cent increase in the FTSE 100. They were up 2 per cent in morning trading.
Full-price sales at the group in the first half of the year rose 3.2 per cent, surpassing its forecast of a 3 per cent decline. The company said pre-tax profit for the six months to July climbed 5 per cent to £420mn.
In the company’s end of year report in March it predicted that full-price sales for this year would fall 1.5 per cent and profits to be £795mn, or 8.7 per cent lower than the previous year.
Next is targeting overseas expansion in the next few years, adding that this drive took a “big step forward” in recent months with sales up 18 per cent for the six months compared with last year.
