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Next lifts full-year profit guidance as warm weather boosts Q1 sales
Clothing retailer Next upgraded its profit guidance for the year on Thursday as it posted a rise in first-quarter sales thanks to unusually warm weather in recent weeks.
In an update for the quarter to 7 May, the company said total sales rose 6% as an 18.1% jump in online sales, driven by growth of Next branded stock and third-party brands on its UK platform, helped to offset a 4.8% drop in retail.
Sales were better than the group had expected, around £40m ahead of its internal forecast, thanks to unseasonably warm weather in recent weeks. Next said the sales over-performance adds around £12m to its full year profit and as a result, the group upped its pre-tax profit guidance for the year to January 2019 to £717m from £705m. This represents a 1.3% decline compared to the previous year, versus the 2.9% drop previously expected.
Next also said it now expects total full price sales to grow by 2.2% versus previous guidance of 1%, while the company also reckoned that its earnings per share will be enhanced by 4.7% as a result of share buybacks.
This, combined with a slightly lower tax rate, means it expects EPS to move forward faster than profits, with its central guidance now for a 3.7% jump compared to 1.4% previously.
At 1120 BST, the shares were up 6.7% to 5,598p.
RBC Capital Markets reiterated its 'outperform' stance on the stock following the update, saying Next is a strong online and cash-returns story at an undemanding valuation.
"While we see some short-term volatility around its trading, driven by tougher comparisons coming up, we see an improved sales outlook, particularly for the higher-rated online business, driven by a broader range of better-priced product and brands, and more competitive service options.
"The lagged effect from a stronger GBP versus the US dollar should help Next from later this year and should enable it to sustain margins and invest more in its customer offer."