Hot weather warms Next's second-quarter figures

Next said the warmer weather helped total full-price sales rise by a better-than-expected 0.7 per cent in the period. PICTURE: NEXT.
Next said the warmer weather helped total full-price sales rise by a better-than-expected 0.7 per cent in the period. PICTURE: NEXT.
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The recent heatwave has boosted fashion giant Next as an 11.4 per cent surge in Directory sales helped offset another steep fall across its high-street stores.

The retailer said the warmer weather, together with an overhaul of its product ranges and online offering, saw total full-price sales rise by a better-than-expected 0.7 per cent in its second quarter to 29 July.

This marked an improvement on the 3 per cent drop seen in the previous three months and came despite a 7.4 per cent drop in sales across its high-street shops.

The group said: "We believe there has been some improvement in our product ranges and our online functionality during this period.

"However, we believe most of the increase in full price sales is due to the much warmer weather and, to a lesser degree, lower markdown sales in the end-of-season sale."

But the group stuck by its guidance for full-year profits to fall by between 6.4 per cent and 13.9 per cent to £680 million and £740m, although it slightly improved its sales outlook.

The bounce-back meant Next enjoyed its first full-price sales rise for a year, with a monthly breakdown showing sales lifting as much as 3 per cent in June and 3.9 per cent in July.

But while full-price sales returned to positive territory, total sales including markdowns fell 2.1 per cent in the quarter as it was left with less stock to shift in its clearance.

Markdowns tumbled 14 per cent as a result, Next said.

Lord Wolfson, chief executive of Next, told the Press Association: "It's been a better half, but we're not getting too excited."

He added that the consumer outlook for the high street remains "very tough" and is forecasting Next's second-half full-price sales to remain lower, down 1.2 per cent, in line with the first half.

He said: "Consumers are very cautious - real earnings are moderately down because wages aren't rising as fast as inflation.

"People aren't in the mood to splurge, particularly on clothing."

Shares in Next soared 10 per cent on the better-than-expected second-quarter performance.

George Mensah, a retail analyst at Shore Capital, said Next has delivered a "notably improved period of trading".

He said while high street sales were still in the "doldrums", trading across the Directory arm was "materially stronger than our forecast".

Lee Wild, Interactive Investor’s head of equity strategy, said:

“It’s been a shocking 20 months for Next, but a dramatic market reaction to better-than-feared second-quarter results shows just how much bad news is baked into the share price. There is a palpable sense of relief in City circles this morning."