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Outlook bright for Next as weather helps profits grow

By John-Paul Ford Rojas

Published 29/07/2015

Looking good: The future is bright for fashion retailers Next
Looking good: The future is bright for fashion retailers Next

Fashion retailer Next has hiked its full-year profit outlook after enjoying a warm weather boost to sales.

The group, which has 23 stores in Northern Ireland, said full-price sales for the six months to July 25 were up 3.5%, picking up from first-quarter growth of 3.2%.

The half-year figure beat the top end of the firm's guidance for growth of 3%. Shares rose 2%.

Week-by-week sales figures showed "continued volatility of consumer demand", with takings up year-on-year by more than £10m in a couple of weeks and down by nearly £6m in others.

But the last six weeks of the period saw successive growth as sunshine brought consumers on to the high street. Next said: "We believe the improvements experienced at the end of the season were mainly driven by warm weather."

The retailer said that of its 3.5% sales improvement, 1.7% came from the opening of "profitable new space". Full price sales for stores were up 0.8% and for its catalogue and online arm, Next Directory, there was an increase of 7.5%.

Total sales including marked-down items were up 3.3%. Next said total stock left over for its end-of-season sale was up 4.8% on last year, with clearance rates lower but in line with internal forecasts. The retailer hiked its central profit forecast for the full year from £810m to £825m, a rise of 5.5% on the prior year, in line with market consensus.

It also lifted its prediction for sales growth for the year to a range from 3.5% to 6%.

The group said it planned to pay a special dividend of 60p a share on November 2. Half-year results will be published on September 10.

Richard Hunter, head of equities at Hargreaves Lansdown stockbrokers, said:

"Traditionally the company tends to manage its expectations lower and subsequently outperform.

"This has again been the case in the first half, helped along by some warmer weather. Next has not as yet upped its second half forecasts, and remains typically cautious for the period on the back of the volatility of consumer demand."

Sophie McCarthy, consultant at retail experts Conlumino, said the update indicated a softening in growth compared to the impressive 2014/15 full year, though performance was better than expected.

She added: "Clothing retailers are perennially at the mercy of the British weather, which has the power to both drive and hamper sales, and this period was no exception for Next.

"A continued focus on multichannel, as well as investment in less developed avenues of growth, such as its improving homewares proposition, will set Next up well for the important second half of the year - ensuring it remains the darling of the high street."

Belfast Telegraph

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