Next has cemented its standing as a star of the retail sector after achieving stronger than expected growth in sales amid tough trading conditions.
The group said sales increased by 5.7% in the 13 weeks to April 27 compared with the equivalent period last year against its guidance of 5%.
Leicester-based Next maintained its guidance for profits for the year to January 31 2025 to come in just shy of a billion pounds at £960 million, up 4.6% on last time.
The update covers a period during which retailers have had to contend with pressure on consumer spending amid the surge in inflation, which started during the recovery from the pandemic.
The Office for National Statistics found retail sales values and volumes remained flat for a second month running in March.
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Next said total group sales for the full year are expected to be up +6% on last year, at £6.2bn.
The group expects to feel the benefit of acquisitions it has made in recent months and growth in core operations. It cited the purchase of the FatFace clothing business for £115 million in October and of an additional 21% interest in Reiss for £128m in September, which took its holding in the fashion retailer to 72%.
Next can use its sophisticated logistics networks to boost the profitability of operations it owns that trade under different names.
FatFace was taken over by lenders in 2020.
John Moore, senior investment manager at wealth manager RBC Brewin Dolphin, said the update showed Next keeps on delivering.
“Next remains, by a considerable distance, the top UK retailer, despite the renaissances of M&S and Primark,” said Mr Moore.
He added: “The company is in a sweet spot where it is carefully growing its branded goods proposition while continuing to upscale the core business. With relatively modest competition and easing inflation, tailwinds for the company appear to be favourable.”
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AJ Bell investment director Russ Mould also enthused about Next’s performance.
He said: “Next remains one of the best-in-class retailers in the UK with investors now looking to see if the company can deliver on overseas expansion as well as bringing new brands on to its third-party online marketplace.
“These are the next levers of growth for a business which has largely conquered the world of high street fashion in its domestic market as weaker rivals slip away.”
However, Mr Mould noted the fact that Next had left its full year sales guidance unchanged despite the outperformance in the period covered by the trading update suggested it expected a year-on-year fall in sales in the second quarter.
Guy Lawson-Johns, equity analyst, Hargreaves Lansdown said particularly warm weather in May and June last year meant Next would face tough comparatives.
The growth in sales in the first 17 weeks of the current year was attributable to an 8.8% increase in online revenues. Retail sales were in line with the same period of last year.
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Mr Lawson-Johns said: “Online revenues continue to drive outperformance. Next’s significant work to enhance its online service is paying dividends. Improved stock availability and seamless operational execution are driving performance beyond anticipated levels.”
Led by chief executive Lord Wolfson, Next grew profits by 4.4% in the year to end January 2024. It grew profits by 5.7% in the preceding year.
Shares in the group closed up 56p at 9064p yesterday, leaving it with a stock market capitalisation of around £11.5bn.
In January Marks and Spencer said it had grown total UK clothing and home sales by 4.8% in the 13 weeks to December 30, to £1.2bn.
The company said then: “Womenswear has been the standout, growing volume and value significantly ahead of the market.”
READ MORE: Marks and Spencer to open stores in Dundee and Ayrshire
Supermarket giant Tesco grew profits by 13% in the year to February 24, to £2.8 billion, from £2.5 billion last time.
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