Next has revealed that for the thirteen weeks to 26 July, full-price sales increased by 10.5% compared to last year, up from its guidance for the period of +6.5%. The increase drove an additional £49m in sales.
The company outlined three main reasons for the overperformance. Its digital marketing “proved more effective than anticipated”, driving international sales faster than predicted and allowing it to increase profitable marketing spend.
Meanwhile, better-than-expected weather at the UK, as well as trading disruption at what it called a major competitor, drove sales. Rival retailer M&S suffered major disruption after a cyber attack crippled its business and took online shopping down earlier this summer. At its AGM in July, M&S said that its current estimate – before mitigation – was of a £300m impact on group operating profit from the cyber incident.
As a result of the sales boom at Next, the company is increasing its guidance for full price sales in the second half from +3.5% to +4.5%, adding an additional £27m of full price sales to its forecast. For the full year, profit before tax expectations have also increased, with the company predicting a £25m increase to £1,105m.
Online sales rise at home and abroad
UK online sales rose by 9.5% for the second quarter and by 9.2% for the half year. Internationally, online sales grew by 26.4% for the second quarter and by 28.1% for the half year as a result of its digital marketing success. For the second half, it has upgraded its international online sales guidance from +13.1% to +19.4%.
Despite the success of the first half, the company said that it went into its end-of-season sale with an additional 5% in surplus stock versus last year. However, it said clearance rates were in line with expectations.
Caution for the second half
Next said it remains cautious for the second half. It expects sales to increase by 4.5% in the second half, compared to +10.9% in the first half. It blamed the expectation for lower growth on a fall in employment opportunities as April’s National Insurance changes filter through. It expects this to also dampen consumer spending.
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