Next upgrades sales and profit forecast following over-performance

Clothing and home products retailer Next has reported better than expected trading in recent weeks prompting it to upgrade its full year forecast.

According to its latest trading update, the first seven weeks of the second quarter has been “materially better than the guidance issued in May” with full price sales up 9.3% year-on-year. This compares to its guidance of -5%. In the period, Next beat its full price sales estimates by £93m.

“We believe the reasons for the over-performance include the change in weather. The onset of warmer weather has made a significant difference to our performance, particularly coming after a wet and cold April,” Next said, adding: “In an inflationary environment, annual salary increases deliver a significant uplift in real household income at the time they are awarded.

“For example, during April annual inflation was running at 8.7% and monthly inflation was 1.2%; if an individual received a pay rise of 5.0%, then their real income would have risen by 3.8% in that month. 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.”

Due to the overperformance, Next has upgraded its full price sales guidance for the full year by £137m to £4.67bn and its full year profit guidance by £40m to £835m.

“This revised guidance increases our full price sales for the full year by £137m (of which £93m has already been achieved). Profit before tax for the full year is now expected to be £835m, which is £40m higher than our previous guidance,” Next said.

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