The Easter Bunny certainly delivered for Next PLC (LON:NXT), which posted a 4.5% jump in first-quarter sales, helped by the “unusually warm weather” over the holiday period, although a cut to full-year earnings per share (EPS) guidance kept the lid on its shares.
The high street retailer, which has been building its online presence in recent years, said the growth was 1.3 percentage points higher than its own forecasts for the opening three months of 2019.
READ: Next, M&S and other UK retailers to benefit from improved retail outlook, says RBC
“We believe this over performance versus forecast was mainly as a result of unusually warm weather over the Easter holiday period, which was particularly helpful to our retail stores,” the company said in Wednesday’s trading statement.
Sales in its stores fell by 3.6% compared with the same quarter of last year, although that is much improved on the 7.9% decline it saw throughout 2018.
Online remains the main growth driver though, and sales in this division jumped 11.8% in the three-month period.
Despite the good start, Next bosses stopped short of lifting their expectations for the year and are still guiding for a 1.7% rise in full price sales and a slight fall in pre-tax profits to £715mln.
“We do not currently believe that the over performance of the first quarter can be extrapolated through to the rest of the year,” the FTSE 100 listed company said.
“The over performance in the first quarter amounted to sales of around £10mln. Given this is a relatively small number in the context of annual sales, we believe it is too early to revise our full year sales and profit guidance.”
EPS guidance cut
Next did trim its earnings per share guidance though on technical factors, noting that the recent rise in the share price means it won’t be buying back as many shares as thought with the £300mln it has set aside.
It now expects EPS growth of 3.4% this year, versus previous guidance of 3.6%
As for the current quarter, Next expects to struggle against tough comparatives, with last year’s warm weather inspiring a post-‘Beast from the East’ shopping binge.
Sales are expected to fall 0.5% in the second quarter, before returning to growth in the third and fourth quarters.
George Salmon, equity analyst at Hargreaves Lansdown commented: “The twin tailwinds of a sunny Easter bank holiday and the non-repeat of last year’s big freeze has helped Next report some strong numbers.
“However, management are known for having a conservative approach to guidance, so we’re not surprised to see expectations remain unmoved. And to be fair just one month is a long time in retail, so a lot can change between now and the end of the group’s financial year in January.”
After advancing at open, Next shares slipped back to be unchanged at 5.766p as the morning session progressed.
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