Next Plc’s shares rose to a record after the retailer raised its guidance for the second time this year, as UK shoppers spent more than expected and a rival’s operations were disrupted by a cyber attack.
The British fashion and homewares company now expects £1.08 billion ($1.4 billion) of pretax profit this fiscal year, up from its previous forecast of £1.07 billion, according to a statement Thursday. The company’s shares, which are up more than 30 percent in the past year, rose as much as 2 percent in early London trading.
Next has been rare bright spot in a British retail industry grappling with higher taxes and payroll costs. The company said in January it would raise prices by 1 percent to offset the impact of the government’s revenue-raising measures, which kicked in at the start of April.
Still, Next said it sold more clothes at full price compared with a year earlier, as warm weather boosted demand for summer wear. Its online overseas business also sold more clothes at full price, an important measure for retailers as it means fewer items had to be discounted which can hurt profit.
The company has been ramping up warehouse automation to save costs, and expanding overseas through its Total Platform selling third-party brands online.
Though Next warned some of its performance was likely driven by the weather bringing forward purchases, an ongoing cyber attack affecting rival Marks & Spencer Group Plc could boost Next’s numbers going forward.
Cyber Attacks
Luxury department store Harrods Ltd. and supermarket chain Co-op have also been targeted by hackers. Co-op said hackers were able to extract customer data from one of its systems, though not bank or credit card details.
Next said the full affects of the Labour government’s tax measures would not be felt until the second half, and predicted retail sales would return to be “broadly flat for the rest of the year.”
British household confidence slumped again in April after a brief recovery, due to uncertainty over US President Donald Trump’s trade tariffs and concern that higher UK taxes would hurt finances.
“There is a danger in the familiar becoming mundane and for investors losing sight of just how impressive this performance has been from the business against what has been an uncertain economic backdrop,” Shore Capital analyst David Hughes said in a note.
By Jennifer Creery
Learn more:
Op-Ed | Next Can Break the £1 Billion UK Profit Curse
Few British store chains have hit pretax profit of $1.3 billion, and even fewer have maintained that success. Next may be different.
Content shared from www.businessoffashion.com.
