Fashion retailer Next Plc (LON:NXT) said a long run of hot weather in the UK boosted demand for its summer ranges in the second quarter but shares dropped on Wednesday as its sales missed analysts' expectations.
The company reported a 2.8% year-on-year increase in full price sales for the second quarter, ahead of its guidance, as 12.5% growth in online sales offset a 5.9% decline at retail stores. Analysts had forecast a 2.9% increase in full price sales.
“We believe that this over-achievement in sales was due to the prolonged period of exceptionally warm weather, which greatly assisted the sales of summer weight product,” Next said.
“It is almost certain that some of these sales have been pulled forward from August, so we are maintaining our sales and profit guidance for the year to January 2019.”
It compares to a 6.0% rise in full price sales in the first quarter, although this was flattered by a particularly poor performance the previous year.
READ: Next shares jump as it lifts full-year forecast after sunny weather boosts first-quarter sales
In the first half, full price sales increased 4.5% with online sales up 15.5% and retail sales down 5.3%.
Next leaves 2019 guidance unchanged
Next maintained its 2019 guidance for full price sales growth of 2.2% and profit before tax of £717mln, a 1.3% decrease on the prior year.
The group said it continues to expect to generate around £300mln of surplus cash.
In January the company announced it would return £300mln of surplus cash to shareholders via share buybacks and this has now been completed. Next expects share buybacks to lift earnings per share (EPS) by 4.7% in the current year.
Shares fell 5.6% to 5,600p in morning trading.
Next reliant on good weather
"The quarter’s performance is explained almost entirely by glorious weather, which the company is certain will have brought forward many August purchases," said Mike van Dulken, head of research at Accendo Markets.
"This implies Q3 could see another sequential slowing of growth into the key Autumn/Winter season."
Van Dulken also pointed out that the company's physical stores remain the dominant sales channel, exposing it to the struggles facing the high street due to a growing number of consumers shopping online.