UK clothing retailer Next raises profit outlook again

London: British clothing retailer Next (NXT.L) on Wednesday raised its full-year profit outlook for the fourth time in six months as it reported better-than-expected sales in a third quarter heavily impacted by variable weather.

The group, which trades from about 460 stores in the UK and Ireland and has an online presence in over 70 countries, is often considered a useful gauge of how British consumers are faring. Its shares were up 2.6% in early trading, extending 2023 gains to 21.4%.

Next said full price sales rose 4.0% in the quarter to Oct. 28, ahead of guidance for a 2% rise. Online sales increased 6.5%, while store sales fell 0.6%.

The group said sales benefited from a cooler-than-average August and typical autumnal weather in late October, but were depressed by a warmer-than-average September.

“We believe the volatility in sales performance is a result of changing weather conditions rather than any underlying changes in the consumer economy,” it said.

Despite cost of living pressures, UK consumer demand has generally held up this year.

However, official data published last month showed British retail sales volumes fell more than expected in September, partly because unseasonably warm weather reduced sales of autumn-wear clothing.

Britain experienced its joint-hottest September on record, part of a heat wave which rival fashion retailer H&M (HMb.ST) said had depressed sales across much of Europe.

Next said it now expected pretax profit before exceptional items for the year to January 2024 of 885 million pounds ($1.08 billion), ahead of previous guidance of 875 million pounds and the 870.4 million pounds made in 2022/23.

It is assuming that full price sales for the rest of the year will be up 2.0%.

Analysts at Liberum said they were optimistic on Next’s prospects, noting its “strong cash generation, management foresight, tech capabilities and new more efficient distribution centre capacity allows it to explore multiple new avenues for growth”.

Next expects inflationary headwinds to continue to ease in its 2024/25 year, but has cautioned that a softening of the labour market may dampen growth in consumer demand.