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Next's 2017 results benefit from favourable weather amid tough retail market

Next's full year earnings will be closely scrutinised by investors on Friday
Investors will be keen to see if Next's luck with the weather has run out this year

Fashion retailer Next Plc (LON:NXT) has been lucky with the weather of late with favourable temperatures boosting demand for its new season clothing ranges.

The company, which reports its full year results on Friday, delivered strong trading over the final quarter as cold weather saw more customers stock up on winter clothes.

That led Next to upgrade the midpoint of its 2017 pre-tax profit guidance range to £725mln from a previous estimate of £717mln.

Favourable weather also helped sales in the third and second quarters but Next has acknowledged that it has been fortunate and remains cautious going into 2018 amid a tough UK retail market.

High street retailers have been struggling as higher inflation prompts consumers to cut back on spending and as more people shop online.

“Subdued consumer demand driven by a decline in real income, the increase in experiential spending at the expense of clothing, and inflation in our cost prices remain challenges for 2018,” Next said in a trading update in January. 

However, the company expects cost price inflation to ease this year, taking off some of the burden.

UBS expects 2017 pre-tax profit will be in line with the company’s own central guidance and sees an unchanged dividend per share of 158p.

“Key issues, in our view, will be the degree of negative operational gearing in Retail, measures to moderate the decline seen last year, and the efficacy of further measures to improve Online service levels,” the bank said.

“Wider issues should include any comments on the consumer outlook, especially related to inflation and real income, any changes in supply chain pressures, and the potential ramifications of capacity reduction in UK apparel.”

With Next already providing guidance for its 2017 results, the focus is likely to be on any statements it makes on trading in the new fiscal year.

Significant announcements due:

Finals: Next Plc (LON:NXT), Smiths Group PLC (LON:SMIN), Henry Boot PLC (LON:BOOT), Robinson PLC (LON:RBN), M Winkworth PLC (LON:WINK)

Economic data: US new homes sales; US durable goods orders

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