Next upgrades profit forecast and issues special dividend as sales beat expectations

Next, the FTSE 100 clothing and homeware giant, has rewarded shareholders with a special dividend while raising its profit forecast for the eighth time in just over a year, as sales have continued to outpace expectations in the third quarter. The retailer’s latest trading update reveals that full-price sales for the 13 weeks to 25 October rose by 10.5 per cent, considerably better than its previous forecast of 4.5 per cent growth. UK sales increased by 5.4 per cent, outperforming the company’s already optimistic guidance, and demonstrating the brand’s impressive resilience despite a challenging economic backdrop.

The business now projects full-year pre-tax profits will reach £1.13 billion, an uplift of £30 million on previous expectations. Investors responded favourably to the news, with Next shares climbing by 690p or 5 per cent to £140.95 in early trading. Overseas performance shone particularly brightly, with sales surging 38.8 per cent, as Next’s increased investment in digital marketing and stronger product availability in Europe came to fruition. The company now expects fourth quarter full-price sales to rise by 7 per cent, up from a prior estimate of 4.5 per cent, revising up forecast sales by £36 million for the period.

Management attributed the strong showing in part to improved stock levels following difficulties in previous years. Next also announced its intention to distribute surplus cash to shareholders via a special dividend expected at the end of January, currently calculated at 310p per share, supplementing an interim dividend of 87p. Having already returned £131 million to shareholders through share buybacks, Next confirmed no further buybacks are currently planned due to the elevated share price.

Under the steady hand of chief executive Lord Wolfson, Next has cultivated a reputation for outpacing expectations. The latest numbers confound recent caution voiced by Wolfson, who has pointed to macroeconomic risks such as slower job creation, higher taxes and restrained government spending. Nevertheless, analysts remain bullish, citing the company’s robust dual business model, continued expansion in third-party brands and success in overseas markets. Panmure Liberum expects momentum to continue and sees potential for double-digit shareholder returns, while Deutsche Bank highlights that Next’s strong delivery across core and international operations more than offsets earlier concerns about the UK outlook.