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(Sharecast News) - UK fashion retailer Next raised annual profit forecasts on Thursday after strong second-quarter full-price sales and better-than-expected clearances of summer stock.
The chain raised guidance by £10m to £845m, just six weeks after its last upgrade. Next also forecast annual full-price sales 1.8% higher than last financial year after they rose 6.9% in the three months to July 30.
However, the profit forecast provided on Thursday would result in a 2.9% fall year on year.
"Stock levels have been well controlled and we went into the end-of-season sale with surplus stock down -22% versus last year. Clearance rates, to date, are ahead of last year and ahead of our internal forecasts, which has added around £4m to group profit before tax," the company said in a trading statement.
"We are maintaining our forecast for full price sales to be up +0.5% versus last year in the second half, which implies full price sales for the full year will be up 1.8%."
Shore Capital analyst Eleonora Dani said the positive outlook suggested Next was "well-positioned to navigate the challenging market conditions and is taking necessary measures to sustain its profitability".
"Next's impressive performance in the second quarter, especially in the online channel, could potentially have a positive read acrosson other online pure players, in our view. "
"A case in point is German online peer Zalando, which has also narrowed its profit guidance to the upper end of its previously communicated range. While Next's upgrade may be considered modest, itis encouraging and highlightsthe factthat consumer demand remains robust."
Aarin Chiekrie, equity analyst at Hargreaves Lansdown said the combination of an online and physical store presence was helping Next weather the current cost-of-living crisis.
"End-of-season sales were ahead of group expectations in the period, adding to the positive tailwinds that Next seems to be catching lately. The group still has a strong high street presence too, with sales here also heading in the right direction. Next's certainly weathering the storm of economic uncertainty admirably, and looks well-placed to prosper further when the cycle turns," he said.
Reporting by Frank Prenesti for Sharecast.com
