Next PLC (LSE:NXT) has raised its full-year profit and sales forecasts after a better-than-expected performance in the second quarter, helped in part by disruption at rival Marks & Spencer, which suffered a cyber-attack that left its website offline for an extended period.
In the thirteen weeks to 26 July, Next reported a 10.5% rise in full price sales compared with last year, beating its own guidance for the period by £49 million.
The fashion retailer said trading in both the UK and international markets exceeded expectations, with the UK performance driven by improved summer weather and the knock-on effect of the problems at Marks & Spencer.
International sales also grew ahead of plan, with the company citing stronger results from digital marketing campaigns that allowed it to increase spending while maintaining profitability.
Next now expects full price sales for the second half of the year to rise by 4.5%, up from its previous forecast of 3.5%, and has raised its profit before tax guidance by £25 million to £1.1 billion.
Total group sales for the year are expected to reach £6.7 billion, a 6.3% increase on last year, while profit before tax is forecast to be up by 9.3%.
Online sales led the growth in the second quarter, with UK sales up 9.5% and international online sales up 26.4%. Retail store sales rose 5.6% over the same period.
Despite the upgrade, Next said it remains cautious about the outlook for the rest of the year, particularly in the UK.
The company cited factors such as softening employment conditions, the impact of recent tax changes, and tougher comparisons with last year’s stronger second half.
Management does not expect a repeat of the positive weather or competitor disruption that boosted sales in the second quarter.
Guidance for the UK business in the second half remains unchanged at 1.9% growth, while international online sales growth has been upgraded to 19.4% for the same period. Next Finance interest income is expected to be flat.
In the absence of any acquisitions, the clothing retailer intends to return any surplus cash that cannot be used for share buybacks through a special dividend early next year.