NEXT hikes outlook after sales boosted by M&S woes
NEXT has upped its annual sales and profit outlook once again after better-than-expected trading, aided in part by disruption at cyber attack struck rival Marks & Spencer.
The high street chain posted a 10.5% rise in full-price sales for the second quarter to 26 July, with growth of 10.9% for the half-year as a whole.
In the UK, sales jumped by 7.8% in the second quarter as the group said it was boosted by "better than expected weather and trading disruption at a major competitor".
Marks & Spencer had to suspend online trading for nearly two months from mid-April after it was hit by a major hack.
NEXT said the recent performance and forecasts for better-than-forecast second half trading means it now expects full-year sales to rise by 7.5% and for profits to increase by 9.3% to £1.11 billion.
It had previously pencilled in sales growth of 6% and for profits to lift by 6.8%. The upgrade marks the group’s third in just five months.
But NEXT said it "remains cautious for the second half", stressing that the improved outlook is for its international arm over the next six months.
It said: "In the UK, we believe we exceeded expectations in the second quarter as a result of better summer weather and trading disruption at a major competitor.
"We do not expect either of these factors to have a material effect in the second half, and so we are not increasing our guidance for UK sales in the second half."
It believes sales growth in the UK will slow sharply to 1.9% as the jobs market starts to falter following the Government’s move to hike National Insurance contributions for employers, at the same time as rising the minimum wage.
NEXT said: "We expect UK employment opportunities to continue to diminish as we enter the second half, with the effects of April’s National Insurance changes continuing to filter through into the economy as the year progresses.
"We believe that this will increasingly dampen consumer spending as the year progresses."
But an online marketing push for its international arm is bearing fruit, helping drive sales 28.1% higher in the first half and with growth of 19.4% now expected in the final six months.
Commenting on the results, Julie Palmer, partner at Begbies Traynor, said: "NEXT continues to outperform in highly a challenging environment for retailers, with strong sales growth and another profit upgrade reinforcing its reputation as a standout retailer. A warm start to the summer and the disruption at M&S gave it a timely lift, but this performance also highlights how it is one of the most consistent operators in the sector.
"That said, there’s a degree of caution as NEXT heads into the second half which suggests there could be some trickier times ahead, with lingering cost-of-living pressures and signs of slowing employment growth due to April's National Insurance changes likely to weigh on spending. While its international operations offer some insulation, UK trading could come under pressure as consumer confidence softens.
"The retailer remains a high street bellwether, but with stormier conditions on the horizon, the coming months will test whether NEXT can maintain its momentum as we head towards the all-important golden quarter."
The news comes as NEXT continues to expand its beauty offering, with dedicated Bath & Body Works spaces across the UK and upgraded beauty areas in its stores.
The retailer now carries over 200 beauty brands, including Clarins, Clinique, MAC, Estée Lauder, Elemis, Benefit, YSL, and Olaplex. It also further expanded its beauty offering by launching its own skincare brand, Woah, in 2022.
