Next posts smaller-than-expected drop in Q1 sales, backs FY guidance

Retailer Next backed its full-year guidance on Thursday as it posted a smaller-than-expected drop in first-quarter sales.

In the 13 weeks to 29 April, total full-price sales edged down 0.7%, but Next noted that this was moderately ahead of its guidance for a 2% decline.

The company maintained its guidance for full-year pre-tax profit of £795m and earnings per share of 501.9p. It also continues to expect a 1.5% fall in full-year sales.

"Although our first quarter performance moderately exceeded our sales guidance, we believe it is too early in the year to alter our overall sales expectations for either the half or full year," it said.

"Shareholders might wonder why we are so cautious for sales in Q2. As we explained in March, the second quarter last year benefited from unusually warm weather and pent-up demand for events such as weddings, proms etc."

At 0930 BST, the shares were up 2.5% at 6,676p.

But Russ Mould, investment director at AJ Bell, said: "While Next’s latest sales update was moderately ahead of its prior expectations, it is nothing to get excited about. Sales growth has stalled and the only area where it is making decent gains is from the income attached to customer credit accounts.

"Next has a serious growth problem and while it may remain a profitable business, a company of its calibre is expected to show financial progression year after year. Repeated guidance for an 8.7% decline in full-year pre-tax profit suggests the business needs to pull a rabbit out of the hat to regain its mojo."