UK: Next raises FY guidance after H1 sales lift
Fashion retailer Next increased its full-year pre-tax profit guidance after recording higher than expected full-price sales in the first half of the fiscal year.
The UK business said Next brand sales rose 2.3% in the six months to 27 July, around the mid-point of its guidance issued in March this year.
However, sales in the period up to the start of the company’s summer sale, on 13 July, were up 3.7%, reflecting higher full-price sales and lower markdowns, which added GBP10m (US$15.3m) to first-half profits.
Next entered its sale period with 20% less stock than last year, clearance rates improved and markdown sales were down by about 13%.
Retail sales for the first half were down 0.9%, but flat up to 13 July, while for Next Directory, sales were up 8.3% and 9.9% respectively.
But, despite this apparently stable performance, Next said: “We continued to experience the weekly sales volatility which we saw in the first quarter.
“It would appear that consumers are becoming more spontaneous in their purchasing habits ... We do not believe increased volatility has much effect on overall spending, but it does mean short-term consumer trends are harder to read.”
Next said it expected second half sales to mirror those in the first half, giving a guidance range of up 1-4%, which would yield full-year sales up 1.5-3.5%.
It now expects pre-tax profits to reach GBP635-675m.
Describing Next as a “steady ship in a stormy sea”, Conlumino retail consultant George Scott said: “Ironically, in a volatile retail environment Next continues to exhibit predictable trading patterns, with an online-driven growth story compensating for weak LFL store performance.
“The Direct online and catalogue business remains the jewel in Next’s crown and, coupled with its best-in-class fulfilment capability, continues to make the larger contribution to sales growth.”
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