Wet won’t dampen Next net

The fashion and furniture retailer’s Directory division, which includes online and catalogue sales, is likely to have capitalised on the unseasonal weather of the past three months, which has seen many high street rivals suffer. Despite the tough backdrop, Investec analyst Bethany Hocking is predicting a modest rise in overall sales for the first half, driven by a surge of more than 11 per cent at the Directory arm.

“Recent market commentary suggests that Directory should have benefited from the wet weather, which drove some shoppers off the high street and on to online,” she said. “Home standalone stores are also likely to have performed well given recent figures from Dunelm and Carpetright.”

Long feted for its multi-channel approach and tight cost control, Next managed an overall increase in sales of 1.4 per cent in the first quarter. This was against tough comparisons from the previous year, which was boosted by optimism around the royal wedding and the late Easter holidays.

The group has said that if overall sales continue to grow at between 1 and 4 per cent for the full year, its annual pre-tax profits will come in at between £560 million and £610m.

Although weak consumer sentiment has been exacerbated by poor weather, Richard Cathcart of Espirito Santo believes Next will continue with its robust performance. He predicts a 4.7 per cent decline in second-quarter like-for-like sales across Next’s retail network of more than 530 stores, but says this will be offset by a rise of more than 9 per cent in Directory.

“Next has a good track record in managing costs and markdown to suit the prevailing environment, and we expect this to have continued in the quarter, meaning that lower sales may not have a worryingly negative impact on full-year profit estimates,” Cathcart added.

The group is planning to use its surplus cash flows to buy back up to £200m worth of shares from investors, and by early May it had spent £36m buying 1.3 million shares.