Shares in fashion retailer Next surged by nearly 9% after it reported a huge sales boom on the back of its shops reopening and the warmer weather.
Next said sales of full-price products grew by 18.6%, when measured against the 2019 pre-Covid equivalent, over the course of the 11 weeks to July 17 — essentially the second quarter of the retailer’s financial year.
The company had initially pencilled in growth of just 3% for the period.
The better-than-expected sales were attributed to pent-up consumer spending demand on the back of retailers coming out of Covid restrictions, the warmer weather, and fewer people going on holiday amid travel restrictions.
Next said it didn’t see such exceptionally strong sales growth levels continuing, but still remained “more optimistic” about its outlook than was the case just three months ago.
As a result, it has raised its revenue growth guidance — for the second half of its financial year — from 3% to 6%.
For the overall year, which runs to next January, Next expects pre-tax profits to be £30m (€35m) better off, pushing annual profits to around £750m, which would be nearer the top of its previous guidance range.
Total group online sales — taking in both the UK and Ireland markets — jumped 44% in the second quarter and by 56% for the first half.
However, Next’s first-half sales in the Republic fell by 54% versus the 2019 comparison, largely because of retail in Ireland reopening from restrictions much later than the UK.
The increase in profit guidance would have been higher had Next not decided to repay £29m of business rates relief to the UK government, accounting for the time its shops were open.
It said it had taken the decision after consulting major shareholders.
Next said it remains committed to distributing surplus cash — which cannot be profitably invested in the business — to shareholders. While it didn’t pay out shareholder dividends last year, due to the pandemic crisis, it is now restarting payouts.
A special dividend — worth a total of approximately £140m — will be paid out in September. A second special dividend is also planned at the end of the year, before Next returns to ordinary dividend pay-outs next year.
• Additional reporting Reuters