Next has raised its full-year profit expectations for the third time in four months and signalled that prices could start to fall next spring for the first time in at least two years.
The fashion and homewares retailer upped its annual profit guidance by £30m to £875m as it said better ranges, the sunny spring and pay rises for many of its customers had helped lift sales.
Full-price sales had risen by 3.2% in the six months to July – a far better performance than an expected 3% drop in sales.
The retailer said its cost inflation was easing, and as a result the prices could fall next year.
Next said it had benefited from the sunny weather in May and June, which had bolstered sales of summer clothing “at a critical time”, as well as from improving its online deliveries. The retailer had previously underestimated the positive customer impact pay rises would have on its sales, it added.
Profits were helped by lower than expected inflation on costs as negotiations with suppliers had been eased by lower global demand for commodities, freight services and production.
Next expects full-year cost prices to rise by 2% this autumn compared with 3% pencilled in previously.
The company added that introducing new designs more frequently and adding more items at the middle and top end of its price range had helped it appeal to a broader audience.
“Fashion has always been about newness but it appears to us that trends are moving faster. Customers are willing to adopt new looks more rapidly than they have been for some time,” the company said in an update to the City.
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In the first half of the year, total sales at Next rose 5.4% to £2.5bn, with a 5% rise in online sales and 0.5% rise in stores. There was also a 28% increase in sales via its total platform scheme, which includes brands such as Gap, Victoria’s Secret and Made.com. Profits rose 4.8% to £420m.
