The boss of 海角视频 fashion giant Next said profits should be better than expected this year as inflation finally starts to ease.
Chief executive Simon Wolfson said he expects pre-tax profits for the year to next January to be £875 million – £30 million more than the business previously thought and 0.5 per cent up on 2022. It was originally thought profits would be down on 2022.
In a trading update signed off by Lord Wolfson, he said total sales for the last six months were up 5.4 per cent year-on-year and half year profits for the period were up almost 5 per cent at £420 million.
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Total sales for the six months were £2.64 billion – compared to £2.5 billion a year before.
Rather than seeing a drop in full price sales, sales were up after the business underestimated wage increases or anticipate how solid the 海角视频 employment market would remain.
The exceptionally warm late May and June also significantly boosted summer clothing sales online and in its 461 stores.
He said short term challenges for the Leicestershire-headquartered business outlined last spring – including slowing sales and inflation – looked set to be superseded by longer-term opportunities with the outlook looking more positive than it had for many years.
He said: “The uncomfortable transition of sales from retail to online appears to have slowed to a more manageable level, not least because less than 35 per cent of our sales are now in shops.
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“Alongside this change, retail property costs have dropped to levels more in line with current trading volumes.”
He said growth opportunities including exploiting its Total Platform – a co-ordinated platform for its website and back-end operations – extending overseas sales and creating new brands and licensing opportunities.
Only this month Next extended its stake in the Reiss fashion brand to 72 per cent following strong 2022 trading figures.
Overperformance in Reiss, the business said, had made up for a “disappointing” underperformance at Joules, in its first year under Next, which had led to a £5.2 million trading loss over the six months.
Market reaction to Next trading update
Russ Mould, investment director at online stockbroker AJ Bell, said: “If you have an idea of the challenges on the horizon, it’s possible to put your business in the right shape to survive. That seems to be Next’s approach, as it has benefited from focusing on key cogs in the business to navigate the difficult market environment.
“Broadening its product offering, making sure the online service is as efficient as possible and keeping a sharp eye on costs have all been key focal points and Next has come out on top. These factors and steady demand from customers have enabled it to raise profit expectations.
“There is nothing snazzy about its products, they are merely functional, which gives Next an element of defensiveness when times are hard.
“There are certain items which people continue to need in good and bad times and offering good quality products via a pleasant shopping experience – tidy stores or an easy-to-use website with swift delivery – means Next remains at forefront of people’s minds when they are thinking about where to shop.”
Writing in the update he said the business had made good progress on four fronts.
He said: “Sales are better than expected; online service has significantly improved; costs are lower than expected and, although it is early days, and there have been bumps along the road, all three streams of new business [Total Platform, NEXT Overseas and product ranges outside the brand] are showing signs of promise.
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“Overseas, in particular, has taken a big step forward in the second quarter.”
Next said it expects prices to rise by about 2 per cent over the autumn and winter season, lower than the 3 per cent increase it had previously forecast, before potentially flattening in the spring of next year.
Shares in Next were up 2 per cent this morning at 7,239p.