Next raised its profit forecasts in the fourth month after wage increases linked to inflation and the warm weather that began the summer encouraged shoppers.
The group’s total sales, which are based on about 500 stores and are considered to be a barometer for the industry as a whole, increased by 5.4 percent year-on-year, reaching £2.6 billion in the first half of the year. This was due to the sunny weather conditions that occurred between June and July, which led consumers to spend more. The full-priced sales rose by 3.2 percent.
Profit before tax increased by 4.8 percent to £420 millions. The company expects a full-year profit of £875millions, up from an earlier guidance of £845millions. It believes it can also deliver £46million more in cost savings than initially planned this year.
The FTSE-100 company has a history of over-promising and under-delivering . It admitted it was “overly conservative about the sales prospects in the current fiscal year. We underestimated the support that nominal wage increases and a robust job market would give to our bottom line.” The exceptionally warm weather of late May and early June also helped to boost our sales at a crucial time.
Online sales in the first quarter of this year reached nearly £1.5 billion, an increase of 5% on the previous year. Retail sales increased by 0.5 percent to £885 millions, while finance grew 7.1% to £143.1million.
Lord Wolfson, Next’s boss, stated that the “uncomfortable shift of sales from retail to online” over the last few years has “appeared to have slowed down to a more manageable amount, not least because we now sell less than 35% of our products in stores”.
The Leicester-based firm expects to book a gain of £110million from the purchase of Reiss , a premium fashion brand. This gain would be pure accounting and not included in profit guidance.
Next expects that inflationary pressures will continue to ease on operating costs and selling prices in the coming financial year.
The shares of the company, which had risen 21 percent in the last year, rose 96p or 1.35 percent to £72.