Next lifts FY sales and profit guidance, shares surge

Next surged on Monday after the retailer upgraded its full-year sales and profit guidance following much better-than-expected trading in the last seven weeks, boosted by warmer weather and the impact of pay rises.

The company lifted its full-price sales guidance by £137m and its profit guidance by £40m to £835m.

In an unscheduled trading update, Next said full price sales in the first seven weeks of the second quarter were up 9.3% versus last year, compared to guidance for a 5% decline. The group said that during the period, it has beaten its full price sales estimates by £93m.

The outperformance was put down to the warmer weather, which it said has made a significant difference, particularly coming after a wet and cold April.

It also pointed to the impact of annual salary increases. "We do not think it is a coincidence that sales stepped forward so markedly at a time of year when many organisations make their annual pay awards," it said.

Despite the upbeat update, Next also cautioned that it does not expect the outperformance to continue.

"If recent pay rises and the sudden change in weather have indeed contributed to the current over-performance, then it is reasonable to expect that the effect will diminish over time because ongoing inflation will slowly erode the positive effect of annual pay increases," it said.

"This is why we are not anticipating the current performance to continue at the same level going forward, albeit we have moderately improved our guidance for the rest of the year."

At 1305 BST, the shares were up 5.9% at 6,818p. Primark owner Associated British Foods, JD Sports and Frasers Group also gained.