Next smashes sales forecasts after bank holiday boost

Unlike Thorntons, Next says the royal wedding and the hot weather were hugely posiitive for sales. The bad news is that it's not feeling any cheerier about the outlook as a result.

by James Taylor
Last Updated: 19 Aug 2013
Another great set of numbers from Next, the clothing retailer that's been one of the few high street winners of the last couple of years. It said today that sales jumped 5.2% in the three months to April, well ahead even of its own forecasts - and it reckons a large chunk of this was down to customers stocking up on new gear to enjoy the hot weather and the royal wedding during all those lovely bank holidays. As a result, Next has now upgraded its sales and profit forecasts for the year as a whole - and there aren't many retailers doing that at the moment. Less cheerfully, however, it doesn't think this is any reason to feel more cheerful about the high street; if anything, it seems to think people have just been buying stuff they would have bought later this year anyway. Let's hope it's underestimating the great British shopper's need to keep refreshing their wardrobe...

Next reckons at least 2.5% of this sales boost can be ascribed to the weather and pre-bank holiday spending; apparently womanswear sold particularly well, with female viewers clearly keen not to be outshone by Kate and Pippa on Royal Wedding day. That's a pretty sizeable leap for a retailer the size of Next - and one that it clearly didn't expect, since that's more or less the difference between its forecast and the final number. This has allowed Next boss Lord Wolfson to boost his full-year sales forecast: he had previously predicted somewhere between 2.5% growth and 0.5% contraction, but he's now expecting growth of 1.5-4%. That means profits will come in £15m higher than expected, probably somewhere between £535m and £585m. That's all the more impressive given the prevailing gloom on the high street.

Now if you're the glass-half-full type, you'll see this as excellent news; if Next has enjoyed a bank holiday boost, chances are that other retailers (not to mention grocers, pubs and restaurants) will have too. However, as is its wont, Next seems keen to pour cold water on any flickering flames of optimism; it said today it's still 'cautious for the full year' given all the well-attested pressures on consumer spending. Indeed, Wolfson suggested that this wasn't a sign of fresh demand - it was just a case of shoppers bringing purchases forward from the summer, so Next was effectively just seeing the benefit a quarter ahead of schedule. This may be true - but we can't help feeling if it gets to September and it's still sunny, some of the purchases made way back in April will feel so last season, darling...

Next will certainly hope so. But there was one other titbit that made for slightly worrying reading: Next also said that it's planning to push up prices by 8% in the second half of its financial year (having already pushed them up 6% in the last few months) to reflect rising commodity costs. If this pattern is repeated across the board, it doesn't bode well for the Bank of England's chances of bringing inflation back below target. And it will mean that in real terms, this summer's must-have clothes are going to take up a much bigger portion of your pay-cheque.



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