Next lifts profit guidance again to almost £1bn as sales soar

UK clothing retailer Next once again upgraded annual earnings guidance, with full year profits now expected to hit almost £1bn as recent full price sales “materially exceeded” forecasts.

The company, which lifted its prospects outlook for the second time in two months, said interim profits for the six months to July surged 7.1% to £452m and said sales in the first six weeks of the second half of the year had risen 6.9%.

Second-half sales growth was upgraded to 3.7%, up from previous guidance of 2.5%.

Next also lifted 2024/25 pre-tax profits forecasts by £15m to £995m, up 8.4% on the previous year, despite a soggy summer and spring in the UK which hit all clothing retailers.

The overseas business did “exceptionally well”, in the first half, posting sales growth of 23%, however in the UK they were only up 1%, due to “tough comparisons with last year’s exceptionally warm Q2”, the company added.

Sales of its own brand items were down 0.9% in the UK, which it described as “potentially worrying" and warranting further analysis, although it cited poor weather this summer, noting that sales had recovered sharply in the last six weeks as the rain finally stopped.

"Next has been on a hot streak of delivering positive news lately, and today’s results didn’t disappoint investors. Skyrocketing demand in its online channel remains a running theme," said Hargreaves Lansdown analyst Aarin Chiekrie.

"Despite already accounting for more than half of group sales, the online channel is still seen as the main growth driver. Expansion overseas is still in the early stages, and if Next can execute its strategy well, there’s a lot of room left to run."

However, he noted that in-store revenue fell 2.1% in the first half with the trend unlikely to change going forward, with high-street shopping "in structural decline".

"Full-price sales continue their upward trajectory. Delivering what fashion-conscious consumers want at the right price point is exactly what’s helping to keep Next’s profitability at the top end of its peer group," Chiekrie added.

"Overall performance has been good, and the current valuation doesn’t fully reflect the growth opportunities at hand. But expanding overseas isn’t easy, as many of its peers have found out the hard way, meaning some ups and downs could be in store along the way.”

Reporting by Frank Prenesti for Sharecast.com