Clothing retailer Next returned to sales growth in its latest quarter, helped by warm weather in June and July and a surge in online sales, sending its shares sharply higher.
The stock, which had fallen 20% over the last year, rose up to 12% after Next also edged up its sales guidance for the full 2017-2018 year and maintained profit guidance. Next had cut guidance in January and May. It is now valued at £6.4bn (€7.1bn).
The company had faltered over the last two years due to a broader slowdown in spending on fashion and footwear that it first identified in 2015.
It has previously warned sales would suffer this year due to a squeeze in UK consumer spending as UK inflation erodes earnings growth, and price rises on garments following the slide in sterling.
“I’m marginally less pessimistic than I was three months ago and it’s encouraging to see some of the improvements coming through on Directory”, said chief executive Simon Wolfson referring to the group’s online business. Wolfson said while he expected price rises to moderate next year, it was harder to predict when UK consumers would start spending more on clothes.
“We’re not expecting it this year,” he said. Next’s full price sales rose 0.7% in the second quarter to July 29. Though full price second quarter sales at Next Retail stores fell 7.4%, they were up 11.4% at the Directory catalogue and internet business, with strong sales both in the UK and overseas. The company did not give sales values; Directory accounts for about 40% of the group total.
“The majority of the boost we got was from much better weather”, said Mr Wolfson, a Conservative Party supporter in the House of Lords and a supporter of Brexit.
Although UK retail spending is shifting online, Next is continuing to expand its store base, believing the risk is that shops become less productive.
A further 150,000sq ft (14,000sq m) of selling space is targeted for 2017-2018 and 250,000sq ft the year after. Profit guidance of £680 (€759m) to £740m was maintained — an outcome that would represent a second straight year of decline.
Rival Marks & Spencer was up 1.1%, Debenhams up 1.7% and Primark owner AB Foods up 1.3%, at one stage.
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