Summer sunshine has brought shoppers flocking to Next shops, helping the brand side-step the consumer downturn and beat the Brexit blues.
Despite this week’s downpours and ongoing political uncertainty, the Leicestershire-based fashion chain said things were looking up – with sales growing and revenue forecasts upgraded.
Shares in the business – which have been edging upwards on the London Stock Exchange for the past couple of years – jumped around 8 per cent on the news today, to more than £60.
Sales for the half year to last Friday were up 4 per cent on the same six months in 2018, with online sales up around 12 per cent.
That more than helped offset a drop in sales from its bricks and mortar stores or almost 4 per cent.
A trading update today said the business now felt profits for the full year would be up by £10 million on previous estimates at £725 million.
The business said full price sales in the last three months – excluding markdowns – were also better than anticipated, up 4 per cent on last summer.
It comes on the back of news that shopping centre giant intu was drawing up a five-year plan to fix its balance sheet following multi-million pound losses in the first half of 2019.
Most Read
The group said the last six months had been “challenging”, with a raft of administrations and CVAs contributing to a 7.7 percent drop in net rental income to £205.2 million.
The market value of the landlord’s centres nationally also plummeted, with the intu Trafford Centre in particular dropping by £200 million and Lakeside in Essex by £120 million.
And earlier in the week shares in Sports Direct tumbled after the market caught up with the release of the company’s delayed accounts.
After initially delaying the document’s release, Sports Direct retail tycoon Mike Ashley used his company’s report to call for the introduction of drug tests for CEOs and CFOs, blame the Government for failing the economy, and described the physical retail market as being in a ‘terminal state’.
But in its trading update, Next said revenues were 4.5 per cent better than the guidance of minus-0.5 per cent given in a May trading statement.
It said: “A closer examination of the quarter’s performance by month shows that full price sales during May and June combined were up 3 per cent.
“July was particularly strong and up 6.8 per cent on last year.
Don’t miss
“However, some of July’s over-performance in full price sales came as a result of lower markdown sales in our end-of-season sale.
“We believe that the sales performance in May/June is a better guide to underlying growth and we have used this number as the basis for our second half guidance.”
Leicester news
Russ Mould, investment director at stockbroker AJ Bell, said Next was back in "top gear" as it reverted to its historical trend of "quietly getting on with the job".
He said: “Importantly, full price sales are up which shows it can still attract customers who are happy to pay up for goods rather than only shopping where there are discounts or low-priced items.
“A key theme among consumer-facing companies’ trading updates in recent months has been the difficulty in beating last year’s comparative period which was helped by good weather.
"There are no such excuses with Next which has managed to produce a good set of numbers despite this year’s weather being less favourable.
“Online remains the growth driver for the group and its latest performance would suggest Next is doing something right to attract a decent level of business in a market where the consumer is cautious towards spending.”
Emma-Lou Montgomery, associate director from Fidelity Personal Investing’s share dealing service, felt last season’s unwanted stock was proving to be a drag on Next’s bottom line.
She said: “With surplus stock sitting around the retailer has been forced to pin back its full-year profits forecast.
“While full price sales during May and June were up 3 per cent, July was even better as the sunshine brought out bargain-hunting shoppers who snapped up sale items and lifted sales 6.8 per cent.
“But it’s last season’s unsold ‘must haves’, left sitting around in stock rooms and warehouses, that are costing it.
“The retailer said this unsold stock will cost it some £10 million and keep full-year profits in check, leaving them only marginally better than last year.”