Next Plc raised its profit guidance for the third time this fiscal year on strong sales, even as British consumer confidence weakens ahead of expected tax rises in Wednesday’s budget.
The British fashion and homewares company said that its annual pretax profit is now expected to top £1 billion ($1.3 billion) for the first time, up from previous guidance of £995 million. Next had already raised its outlook in August from £980 million.
Full price sales rose almost 8 percent in the third quarter compared with the previous year, helped by the early arrival of cold weather which encouraged shoppers to stock up on winter clothing, the company said.
Next shares rose 2.8 percent in early trading in London. The stock is up more than 50 percent in the past 12 months.
The improved outlook appears to be “driven by a combination of buoyant international expansion and good domestic traction,” James Grzinic, equity analyst at Jefferies, wrote in a note to clients. Next previously said its overseas business, where it sells clothes online in Europe, parts of the Middle East and Asia Pacific, helped offset some summer weakness in the UK.
“The online channel is likely to remain the main growth driver,” wrote Aarin Chiekrie, equity analyst at Hargreaves Lansdown, in a note. “It already brings in more than half of the group’s sales, and expansion overseas is still in its infancy.”
However, he added that given the potential size of the overseas markets where Next is gaining traction “there’s a big opportunity if Next can execute its expansion plans well.”
Next’s performance stands in contrast to the rest of the sector, with fashion retailers contending with weaker spending. Last month Associated British Foods Plc, which owns discount fashion retailer Primark, blamed unseasonable weather for a decline in footfall and softer volumes in the second half.
The results come just hours ahead of what could be one of the UK’s biggest-ever tax raising budget announcements. Rachel Reeves, chancellor of the Exchequer, is expected to raise about £35 billion a year in tax and welfare savings by the final year of the parliament, and propose another inflation-busting minimum wage increase.
Next’s Chief Executive Officer Simon Wolfson has previously warned that higher wages may result in store closures.
By Jennifer Creery
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