News Column

Next raises profit forecast again after strong quarter

July 30, 2014

Julia Kollewe, theguardian.com



Next has entrenched its dominance over rival Marks & Spencer with booming sales and a big increase in its annual profit guidance.

The clothing chain upped its profit forecast for the third time since March, from 750m-790m to 775m-815m, in the latest sign that shoppers are out spending again. Its high street sales rose by 6.4% in the three months to 26 July, with directory catalogue and online sales surging 18.8% over the same period. Next continues to take market share from rivals after expanding into homewares and revamping its clothing ranges. The warm weather has boosted sales of summer clothes and swimwear.

The retail chain's chief executive, Lord Wolfson, said: "You're allowed to talk about the weather when things are good. We have had a really nice warm summer which has definitely helped sales of seasonal stock."

Next, long regarded as a "little sister" to M&S, caused a stir when its stock-market value overtook its rival two years ago despite having far fewer stores and total sales. Today Next has a market value of about 10bn against its rival's 7.1bn. This year, Next leapfrogged the M&S with annual profits of 695m, and looks to have widened its lead over M&S.

Next has more than 500 stores in Britain and Ireland and another 200 overseas, while M&S has nearly 800 UK stores and 455 abroad. M&S remains Britain's biggest clothing retailer by total sales, but those have been falling for 12 quarters in a row as the retailer struggles to shed its frumpy reputation and attract younger shoppers.

Next's sales are ahead of the 5.5%-9.5% full-year growth guidance given in April, prompting the company to raise this to 7%-10%.

Wolfson said he remains concerned about the impact of higher interest rates and rampant house prices in south-east England. "There's no doubt that if the economy continues to perform well at some point interest rates will go up and at that point we will need to be cautious about our budgeting," he said, adding that Next's core customers are particularly vulnerable to an increase in rates, which could come at the turn of the year.

Next recently lost product director Christos Angelides to US fashion chain Abercrombie & Fitch and its finance director David Keens, who decided to retire after 23 years in the post. Angelides' responsibilities are expected to be split between different people Keens will be replaced by Amanda James, currently brand finance director, from next March.

Fredddie George, retail analyst at Cantor Fitzgerald, said: "The company has significantly outperformed the market in a more difficult quarter than the first quarter. It has, as yet, not seen any negative impact from the resignation of Christos Angelides."

He added: "The directory will continue to benefit from growth in the online market, an increase in customer numbers, a broadening of the ranges and the opportunity to develop overseas."

Next delighted shareholders by paying a third special dividend of 50p a share this week, repeating payouts in February and May.


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Source: Guardian Web


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