Retailer Next upgrades profit outlook for fifth time in eight months

Next said it expected pre-tax profit before exceptional items for the year to January 2024 of £905m (€1.05bn)

Clothing retailer Next raised its profit forecast on Thursday for the year to the end of January 2024 for the fifth time in eight months as it reported a better-than-expected 5.7% rise in full-price sales for the nine weeks to December 30th.

The group, which trades from around 460 stores in Ireland and the UK and has an online presence in over 70 countries, is often considered a useful gauge of how British consumers are faring.

Next is the first major retailer to report on how inflation and weak consumer confidence affected sales in the run-up to Christmas. 

It has previously linked its strong performance to inflation-linked pay rises prompting shoppers to buy more clothes.

The group said it expected pre-tax profit before exceptional items for the year to January 2024 to increase by £20bn to £905m (€1.05bn), ahead of previous guidance of £885m (€1.03bn) and the £870.4m (€1.01bn) made in 2022/23.

Of the £20m increase, £17m came from the sales beat to date and £3m comes from an upgraded forecast for full-price sales in January.

Next year the business forecast profits to grow to £960m (€1.11bn).

The group also gave guidance for its 2024/25 year, forecasting sales up 6.0% and profit up 5%.

Next has been on an acquisitive streak in recent years, buying brands including FatFace, Joules, Cath Kidston and Made.com. 

The company has also strengthened its control over UK fashion house Reiss.

Looking forward, the group said the largest cost increase will be wage inflation, which is expected to be around £60m (€69.6m). 

To mitigate some of this cost increase, Next said it planned to recover around £17m by increasing its bought-in gross margin by 0.4%.

Additional reporting from Reuters and Bloomberg.