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Next lifts full-year profit guidance as warm weather boosts Q1 sales
Clothing retailer Next upgraded its profit guidance for the year on Thursday as it posted a rise in first-quarter sales thanks to unusually warm weather in recent weeks.
In an update for the quarter to 7 May, the company said total sales rose 6% as an 18.1% jump in online sales, driven by growth of Next branded stock and third-party brands on its UK platform, helped to offset a 4.8% drop in retail.
Sales were better than the group had expected, around £40m ahead of its internal forecast, thanks to unseasonably warm weather in recent weeks. Next said the sales over-performance adds around £12m to its full year profit and as a result, the group upped its pre-tax profit guidance for the year to January 2019 to £717m from £705m. This represents a 1.3% decline compared to the previous year, versus the 2.9% drop previously expected.
Next also said it now expects total full price sales to grow by 2.2% versus previous guidance of 1%, while the company also reckoned that its earnings per share will be enhanced by 4.7% as a result of share buybacks.
This, combined with a slightly lower tax rate, means it expects EPS to move forward faster than profits, with its central guidance now for a 3.7% jump compared to 1.4% previously.
At 1120 BST, the shares were up 6.7% to 5,598p.
RBC Capital Markets reiterated its 'outperform' stance on the stock following the update, saying Next is a strong online and cash-returns story at an undemanding valuation.
"While we see some short-term volatility around its trading, driven by tougher comparisons coming up, we see an improved sales outlook, particularly for the higher-rated online business, driven by a broader range of better-priced product and brands, and more competitive service options.
"The lagged effect from a stronger GBP versus the US dollar should help Next from later this year and should enable it to sustain margins and invest more in its customer offer."
In an update for the quarter to 7 May, the company said total sales rose 6% as an 18.1% jump in online sales, driven by growth of Next branded stock and third-party brands on its UK platform, helped to offset a 4.8% drop in retail.
Sales were better than the group had expected, around £40m ahead of its internal forecast, thanks to unseasonably warm weather in recent weeks. Next said the sales over-performance adds around £12m to its full year profit and as a result, the group upped its pre-tax profit guidance for the year to January 2019 to £717m from £705m. This represents a 1.3% decline compared to the previous year, versus the 2.9% drop previously expected.
Next also said it now expects total full price sales to grow by 2.2% versus previous guidance of 1%, while the company also reckoned that its earnings per share will be enhanced by 4.7% as a result of share buybacks.
This, combined with a slightly lower tax rate, means it expects EPS to move forward faster than profits, with its central guidance now for a 3.7% jump compared to 1.4% previously.
At 1120 BST, the shares were up 6.7% to 5,598p.
RBC Capital Markets reiterated its 'outperform' stance on the stock following the update, saying Next is a strong online and cash-returns story at an undemanding valuation.
"While we see some short-term volatility around its trading, driven by tougher comparisons coming up, we see an improved sales outlook, particularly for the higher-rated online business, driven by a broader range of better-priced product and brands, and more competitive service options.
"The lagged effect from a stronger GBP versus the US dollar should help Next from later this year and should enable it to sustain margins and invest more in its customer offer."
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