Fashion retailer Next boost from Britain's hot summer

Paul Sandle

Next got a boost from Britain’s hot summer with a 2.8% rise in second-quarter sales but the fashion retailer does not see the warm glow lasting, sticking to forecasts that indicate little growth for the rest of the year. The shares, which has been a standout performer among struggling British retailers largely due to the success of its online range, fell as much as 7.25%.

“We over-performed in the second quarter as a result of the weather; we think some of that will be sales pulled forward form August,” chief executive Simon Wolfson said.

“Some of the stock we were planning to sell in August has already sold,” Mr Wolfson said.

He said the warm weather had been good for summer fashion, but that was not a reason in itself to change its outlook.

Hargreaves Lansdown analyst George Salmon said hopes had been high that the sunny weather would have led to higher profit expectations, but Next said it would rather wait and see how the remainder of the summer goes.

“This seems fair enough, but it will have left a few wondering if the best summer in years isn’t enough to upgrade profits, then want is?” he said.

Next’s positive performance followed a strong first quarter for the fashion and homewares retailer against an easy comparative, which led it to upgrade forecasts in May.

It expects full-price sales to grow by 2.2% for the year to January 2019, and group profit before tax to dip slightly to £717m (€804m) at the centre of its guidance.

Mr Wolfson said the 4.5% rise in first-half sales implied there would be little growth in rest of the year. “The second half is slightly bigger, so (sales) will be slightly up, but not dramatically,” he said.

Growth continued to be driven by Next’s online operation, with sales up 12.5% in the 12 weeks to July 28.

Sales in its retail stores fell 5.9% in the quarter, an acceleration of the 4.8% decline seen in the first quarter.

Mr Wolfson said the online operation had suffered growing pains. “In our online warehouses, we are beginning to get close to capacity and as warehouses get close to capacity they become crowded and a little bit less efficient,” he said.

Reuters