By James Davey
LONDON (Reuters) -Next said on Wednesday it expected to report annual profit in excess of 1 billion pounds ($1.3 billion) for the first time in its history in its current financial year, underscoring the success of the British clothing retailer.
The group, led by CEO Simon Wolfson, raised its outlook for the third time in three months after a better-than-expected 7.6% rise in full-price sales in the third quarter to Oct. 26.
The retail company raised its outlook for the third time in three months after a better-than-expected 7.6% rise in third quarter to Oct. 26 full-price sales, driven by the early arrival of colder weather this year, versus an unusually warm September and early October last year.
Breaking through the 1 billion pound profit mark would highlight Next’s position as one of Britain’s best-run retailers, with a successful recipe that combines more than 800 stores in the UK and Ireland and nearly 8 million online customers.
While other familiar retail names, such as Debenhams and BHS, have disappeared from British shopping streets, Next adapted early to the shift to online sales.
It also has nearly 2 million overseas customers buying through its website and many more who buy its products via third party websites, or so-called aggregators.
The strong performance, which puts it in the ranks of supermarket Tesco and clothing and food retailer Marks & Spencer as British retailers to have made a profit of over 1 billion pounds, has sent its shares up by 48% over the last year, hitting a record high in September.
The stock was up 1.4% on Wednesday.
“It should continue to benefit from its broad range and strong omnichannel offer, with fast, highly automated logistics and a well-developed customer base,” said analysts at RBC Capital Markets.
But they noted that with around 85% of Next’s sales coming from the UK it remains leveraged to the UK consumer outlook, and potentially a softer employment outlook.
Next, which is considered a useful gauge of how consumers are faring, raised its guidance for the fourth quarter by 1 percentage point to 3.5%.
It said the improved sales in the third quarter along with its forecast for the fourth quarter added 43 million pounds to full-price sales and 10 million pounds to profit.
That took its profit guidance for the 2024-25 year from 995 million pounds to 1.005 billion.
Analysts have pointed out that autumn 2024 is the first season in more than 18 months that has delivered something close to expected UK weather patterns. Autumn 2023 was unseasonably warm making year-on-year comparisons favourable.
Official data published earlier this month showed UK retail sales unexpectedly rose in September. However, other retailers have said shoppers remained nervous about spending on discretionary items ahead of the new Labour government’s budget statement later on Wednesday.
($1 = 0.7688 pounds)
(Reporting by James Davey, Editing by Paul Sandle, Kate Holton and Jane Merriman)
