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July 29, 2014 9:57 am
Shares in Next rallied more than 2.5 per cent in early morning trading on Tuesday as the fashion retailer reported double-digit sales growth and raised its sales and profit guidance range for the full year.
Lord Wolfson, chief executive, said his “general impression” was that the British consumer was “more comfortable this year than the same time last year”.
He said that Next’s strong sales performance had been assisted by warmer weather over the past three to four months, compared with the “particularly poor” weather at the same time last year.
The FTSE 100 company, which has a market capitalisation of £10.2bn, said in a trading statement on Tuesday that total brand sales growth for the year was expected to be between 7 and 10 per cent, compared with previous guidance of 5.5-9.5 per cent.
It said full-year profit before tax, previously guided at between £750m and £790m, would now be between £775m and £815m.
Next reported that total sales for the 26 weeks to July 26 were 10.7 per cent higher than a year previously, with 2.4 per cent coming from the opening of “profitable new space”.
Sales at its retail stores were 7.5 per cent higher in the period, while its directory sales were up 16.2 per cent.
The company conceded that its full-year sales guidance “might appear overly cautious” as it was lower than its current rate of growth. But it said last year’s first two quarters were affected by a particularly cold spring and Easter which “presented a soft comparison for this year”.
Lord Wolfson said he expected the rate of sales growth to lessen in the fourth quarter as comparable sales from the previous year were a lot stronger.
The company, which had paid or declared £223m of special dividends and also returned a further £105m through share buybacks, did not “anticipate paying any further special dividends in the current year”.
Investec, which has a “hold” recommendation on Next, said that the trading update “highlights the strong form the business finds itself in”.
“Retail LFLs (like-for-like sales) remain in positive territory, benefiting from market share gains across product categories and the strength of full-price sales leaves gross margins ahead at half time,” said its note.
Next’s interim results will be published on September 11.
In early trading in London on Tuesday, shares in Next rose by 165p to £66.85, a rise of 2.5 per cent.
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