- Next upgrades guidance for third time in five months after bumper Q2
- But the FTSE 100 retailer warns the UK outlook is worsening
Next has lifted annual profit expectations for the third time in just five months after second quarter sales were lifted by warm weather and cyber disruption at rival Marks & Spencer.
However, the group warned UK trade would face pressure over the rest of the year as it flagged weak consumer confidence and a deteriorating jobs market.
The FTSE 100 clothing and homeware retailer told investors on Thursday full-price sales in the three months to 26 July were 10.5 per cent ahead of the same time last year.
This smashed guidance of 6.5 per cent and following growth of 11.4 per cent in the first quarter.
It said sales ‘overperformed’ in both the UK and overseas, with Next citing better-than-expected weather and ‘trading disruption at a major competitor’ for its strong domestic performance.
The M&S cyber attack is understood to have cost the retailer around £300million after the disruption shut down online operations for several weeks.
Next said its digital marketing efforts overseas had also ‘proved more effective than anticipated’ during the quarter, helping it to follow guidance upgrades in May and March.
Said better-than-expected weather also helped lift UK sales during the second quarter
As a result, Next added £25million to its full-year pre-tax profit forecast to just over £1.1billion.
Next shares were up 1.9 per cent to 12,510p in early trading, having added almost 30 per cent since the start of the year.
Despite a bumper first half, Next kept second half UK sales guidance at a modest 1.9 per cent, versus 7.6 per cent in first half.
It said: ‘We expect UK employment opportunities to continue to diminish as we enter the second half, with the effects of April’s National Insurance changes continuing to filter through into the economy as the year progresses.
‘We believe that this will increasingly dampen consumer spending as the year progresses.’
Conversely, the group upgraded second half guidance for international online sales growth from 13.1 to 19.4 per cent as the group now believes it can ‘invest more in profitable digital marketing than we had originally planned’.
Richard Hunter, head of markets at Interactive Investor, said: ‘The cyber incident at Marks & Spencer and warmer weather were both tailwinds to a strong first half which will not be repeated in the second.
‘The numbers will come up against stronger comparatives from last year, and the group is also predicting a dampening of consumer demand as job openings become scarcer and as the full effects of the National Insurance contribution rises begin to wash through.
‘The group has a very simple and clear appreciation for product (the brand) and platform (enabling third-party sales) being its current drivers.
‘Over recent times the group has leaned towards full-price sales at the expense of discounts, and the strategy has paid off with the company previously noting that there is an increasing proportion of customers who are buying fewer, but more expensive items, which potentially brings new opportunities for Next slightly higher up the price chain.’
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