Fashion retailer Next’s share price surged on Monday after the firm released an unscheduled trading update.
The company was last 4.8% higher in start-of-week trading, at £67.48 per share, and leading the FTSE 100 northwards.
Next declared that “trading in the last seven weeks has been materially better than the guidance we issued in May.” As a consequence it said it expects sales to rise 1.4% for the full year (to January 2024). It had previously tipped a 1.5% year on year decline.
Revenues are now expected to clock in at £4.67 billion, a lift of £137 million from last month’s forecasts.
Meanwhile, pre-tax profit estimates were upgraded to £835 million. This is up £40 million from May’s predictions and would represent a 4.1% fall from financial 2023 levels.
Sunny weather boost
Next said that full-year sales in the first seven weeks of the current quarter were up 9.3% year on year. The business had been expecting a 5% reversal.
The business said that “the onset of warmer weather has made a significant difference to our performance” so far in the quarter, and especially in the wake of cold and wet weather in April.
Next also said that improving pay packets in the UK have boosted sales in recent weeks. It commented that “we do not think it is a coincidence that sales stepped forward so markedly at a time of year when many organisations make their annual pay awards.”
Cautious Outlook
Yet despite recent strong trading Next retained its sobre tone for the rest of the year.
The company said that “if recent pay rises and the sudden change in weather have indeed contributed to the current over-performance, then it is reasonable to expect that the effect will diminish over time because ongoing inflation will slowly erode the positive effect of annual pay increases.”
It added that “this is why we are not anticipating the current performance to continue at the same level going forward, albeit we have moderately improved our guidance for the rest of the year.”
Today’s market update is the latest in a string of better-than-expected trading statements from Next. In its most recent update in May it announced a 0.7% drop in full-price sales were during the 13 weeks to 29 April. A 2% year on year drop had been anticipated.
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