Clothing and homeware chain Next held its profit guidance steady and said that sales heading into the final months of the year are slightly better than expected.
Full-price sales rose 0.4 per cent during the third quarter, compared to the same time a year earlier as consumers increasingly become more selective when shopping for clothes and homeware. The retailer said sales improved during the period as temperatures dropped and consumers bought heavier weight products. Next’s shares rose 1 per cent in early trading.
Next is maintaining its full-year pretax profit forecast of £840 million (€976 million).
Considered a bellwether for the health of Britain’s high-street retailers, Next has issued two profit warnings this year as soaring inflation and a devalued pound undermine consumer confidence. Shoppers are reining in spending on fashion and furniture as costs rise for everything from food to energy with prices in shops now at their highest since at least 2005.
The update reflects “a period of resilient consumer spend”, analysts at Jefferies wrote in a note to clients.
Next has about 500 stores in the UK and Ireland and a large domestic and international online division selling its own range of fashion, as well as third-party brands. It also uses its network to help rival brands sell online.
Investment bank Liberum named Next as one of its top picks among consumer companies for its strong balance sheet, resilient margins and revenue in advance of the pre-pandemic period. “The performance of the group is admirable,” Liberum analysts wrote on Wednesday.
Still, more broadly rising prices are weighing on consumer confidence. Shop-price inflation accelerated to 6.6 per cent in October, a record for the British Retail Consortium’s index that started 17 years ago, and up from 5.7 per cent in September.
The economy is in “a very dark period and prices are likely to rise further until reaching the peak”, said Clive Black, an analyst at Shore Capital.
Other retailers are struggling, with fast fashion chain Boohoo cutting its profit guidance in September and being downgraded to a sell recommendation at Liberum due to “several headwinds”. Rival Asos, meanwhile, is restructuring by reducing stock, slowing automation and cutting spending. – Bloomberg
