Shares in Next were down by 6.30% this morning (1 August)

Shares in Next were down by 6.30% this morning (1 August)

Exceptionally warm weather helped buoy sales at Next Plc in the second quarter, but the rise was not enough to spark an increase in the UK fashion and homewares retailer's full-year guidance, sending shares tumbling by more than 6% this morning (1 August).

Full price sales for the 12 weeks to 28 July were up 2.8% on last year and ahead of company guidance, Next reported in its latest trading update.

"We believe that this over-achievement in sales was due to the prolonged period of exceptionally warm weather, which greatly assisted the sales of summer weight product," the retailer said. "It is almost certain that some of these sales have been pulled forward from August, so we are maintaining our sales and profit guidance for the year to January 2019."

Full price sales for the 26 weeks ended 28 July, meanwhile, were up 4.5% on last year. Sales in its online business during the first half were particularly strong, up 15.5%, driven by the growth of the group's overseas and third party brands business, along with more modest growth in sales of Next branded stock in the UK. Next retail sales, meanwhile, dropped 5.3%.

For the full year, the retailer continues to expect full price sales to be up by 2.2% on last year, with group pre-tax profit expected to drop 1.3% on last year to GBP717m (U$940.4m).

Next is due to release its results for the first half of the year on 25 September.

Sofie Willmott, senior retail analyst at GlobalData, notes a "robust" performance in the first half has not given Next the confidence to up its full-year guidance, with the retailer putting much of its second-quarter growth down to the warm weather and appreciating that the conditions that have buoyed sales so far cannot be relied upon for the rest of the year. 

"Next's results continue to demonstrate the polarisation of shopping channels as consumer spend transitions online. The retailer has capitalised on the shift by enhancing its branded product offer, helping Next to achieve impressive growth despite being a mature player in the online market," she adds. "E-commerce sales were driven by third-party brands, which include lifestyle retailers like Joules, Boden and Ted Baker that complement Next's own brand range and appeal to its core shopper while also attracting new customers."

Yet while the online channel is thriving, store sales continue to tumble, she notes.

"However Next is managing the decline carefully, working with landlords to negotiate rents and adding service and leisure elements to stores to create interest and increase profitability," Willmott says. "Given that online is trading well and accounts for almost half of sales, Next is in a much better position to weather the tough retail environment in comparison to its struggling midmarket competitors including M&S, Debenhams and House of Fraser.''