Strong trading at Next’s summer sale as shoppers continue to spend more on clothing than expected has prompted a second profits upgrade at the retailer in just over six weeks.
Next, which has about 550 stores in the UK and Ireland and is considered a good barometer of British consumer spending, said it expected to make £845m in annual profit, £10m more than previously forecast, as last month’s exceptionally wet weather dampened, but did not snuff out, shopper demand.
The group’s summer sale raked in £4m more in profit than expected and full-price sales had risen by 3.7% in the six weeks since 17 June. While this was a fall back from the 9.5% pace of growth in the seven weeks to 17 June, it was well ahead of the 0.5% rise Next had predicted.
The clothing and homeware retailer said it still expected sales growth to slow to just 0.5% for the rest of the year.
The upgrade comes after Next said in June that warm weather and pay rises for workers in April, at the start of the new financial year for many companies, had boosted profit hopes by £40m.
Analysts said Next had pulled off a strong performance in a market that had got tougher over the summer.
The number of shoppers at retail destinations, including shopping malls, high streets and retail parks, fell by 0.3% between June and July, according to analysts at Springboard – the first June-to-July fall on the index since it began in 2009.
The number of shoppers was down by just over 12% on pre-pandemic levels last month compared with an 8.6% deficit in June.
Next is likely to have bucked this trend thanks to its mix of a high street presence and a slick website as wet weather reduced the number of browsers at the shops. The retailer is also thought to have taken market share from online specialists because it offers free click-and-collect and returns at its stores for a wide range of brands, just as costs for delivery services have risen.
“Next shows that it continues to deliver in a challenging retail environment,” said Caroline Gulliver, an analyst at Stifel, adding that Next’s move into hosting other brands on its website and in some stores appeared to be paying off.
“With inflation showing signs that it is finally starting to fall, Next’s strong brand, multi-channel position and growing platform offering mean it is well-placed to capitalise on an improving consumer environment.”
However, analysts suggested tougher times could be on the way. James Grzinic, a retail analyst at Jefferies, pointed to “a reducing willingness by consumers to spend their improving disposable income”.
