Oct 30, 2013
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Next raises year profit forecast

Oct 30, 2013

LONDON, England - Next, Britain's second biggest clothing retailer, edged up its year profit guidance on Wednesday after posting third quarter sales a touch above expectations.

The group, which trades from over 500 stores in Britain and Ireland and about 200 stores in over 30 countries overseas, as well as through its Directory internet and catalogue business, said trading had been volatile but did not mention unhelpfully warm autumnal weather as it reported total sales up 4.3 percent in the 13 weeks to October 26.

Next at Castlepoint

That outcome was just above Next's guidance for sales growth of 1-4 percent in its second half and represented an acceleration from growth of 2.3 percent in the first half.

Next was reliant on a strong performance from Directory, where sales increased 10.7 percent. Sales at traditional stores rose 0.4 percent.

Though data and surveys have indicated the outlook is improving for UK consumer spending, which generates about two-thirds of gross domestic product, retailers are generally still cautious as inflation continues to outpace wage rises.

Tesco, Sainsbury's and Debenhams have all recently said they are not counting on the pace of any consumer recovery picking-up significantly in 2014.

Annual growth in British retail sales unexpectedly ground to a halt over the past month, hit by the first big fall in supermarket sales since February, the Confederation of British Industry (CBI) said on Monday. It said there was optimism the stalling of growth was just a blip.

Next has generally been able to defy the tough macro economic background helped by its strong online offer, new store openings and diversification into new product areas, such as homewares, as well as new overseas markets.

The firm said it now expected a 2013-14 pretax profit of 650-680 million pounds, a year-on-year increase of 4.6-9.4 percent. It previously guided to a pretax profit of 635-675 million pounds.

Its sales forecast for the year was raised to up 2.0-3.75 percent from up 1.5-3.5 percent, while its forecast for earnings per share (EPS) was increased to up 15-21 percent from up 12-19 percent.

EPS will be enhanced by share buybacks of at least 300 million pounds, of which 295 million pounds has already been purchased, as well as a lower tax rate.

Shares in Next, up 45 percent over the last year, closed Tuesday at 5,205 pence, valuing the business at 8.12 billion pounds.

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