The Courier & Advertiser (Fife Edition)
Bellwether retailer Next shares surge on sales rise
HIGH STREET: Fashion chain cautious despite better-than-expected performance
Shares in high street bellwether Next surged by more than 10% yesterday as the retailer revealed a rise in full sales.
The group said warmer weather, together with an overhaul of its product ranges and online offering had led to a better-than-expected 0.7% increase in full price sales in the second quarter to July 29.
The performance was a significant improvement on the 3% drop seen in the previous three months.
The group’s Next Directory arm was responsible for the uplift with an 11.4% boost in sales offsetting another steep fall across its high street retail stores.
The retail arm saw sales drop off by 7.4% in the period, compounding an 8.1% fall in the first quarter of the year.
On a year-to-date basis, sales within the group’s shop estate are 7.7% lower.
“We believe there has been some improvement in our product ranges and our online functionality during this period,” Next said.
“However, we believe most of the increase in full price sales is due to the much warmer weather and, to a lesser degree, lower markdown sales in the end-of-season sale.”
The bounce-back meant Next, which is still pursuing long-held ambitions to establish a major outlet at Kingsway West in Dundee, enjoyed its first fullprice sales rise for a year,with a monthly breakdown showing sales lifting as much as 3% in June and 3.9% in July.
But while full-price sales returned to positive territory, total sales including markdowns fell 2.1% in the quarter.
The group maintained its guidance for full-year profits to fall by between 6.4% and 13.9% to £680 million and £740m, although it slightly improved its sales outlook.
Next chief executive Lord Wolfson said it had been a “better” first half but the firm was “not getting too excited.”
He added the consumer outlook for the high street remains “very tough” and is forecasting Next’s second-half full-price sales to remain lower – down 1.2%, in line with the first half.
“Consumers are very cautious – real earnings are moderately down because wages aren’t rising as fast as inflation,” Lord Wolfson said.
“People aren’t in the mood to splurge, particularly on clothing.”
Shares in Next soared 10% higher on the better-than-expected secondquarter performance. Shore Capital retail analyst George Mensah said Next had delivered a “notably improved period of trading” but high street sales were still in the “doldrums”.
Shares in Next closed up 301.51 at 4,320.70 last night.