Next assuages high street fears

UK fashion retailer Next has reported it expects full year profits before tax to exceed market expectations. The chain said profit would be “in the range of £435 million to £450 million”. On Wednesday the company said that like-for-like sales unaffected by openings in the period 1 August to 24 December were down 3.2 percent, but warned that the first half of 2006 would see like-for-like sales remain at their current level. Meanwhile, sales were up 8.7 percent. Combined sales of Next Retail and Next Directory rose 9.8 percent, while Next Directory sales increased 13.7 percent.

“We remain cautious for the first half of the new year. Whilst we expect to grow sales from the addition of new space we are budgeting for like-for-like sales to continue to run at about 3 percent over the next six months,” said the clothier. “We saw an increase in winter clothing sales with a change in the weather before Christmas, but I think it would be a mistake to characterise that as a revival in the consumer economy,” Chief Executive Simon Wolfson told Reuters.

Although analysts were pleased with the profit news, analyst John Stevenson of Shore Capital told the FT: “By our calculations, which take into account the effects of new openings, these like-for-like figures are broadly unchanged since September. While we welcome the news on profits and are upgrading our figures, there is an element of caution.”

Furthermore, he called the outlook “a bit staid” and commented on the trading environment still being tough. Next’s performance is generally perceived as a reliable indicator for the retail sector, and analysts have followed the retailer closely.

Since it announced its worst trading results in seven years in September, analysts have been waiting for Next to improve its performance. In the meantime they had predicted underlying sales would be down 3 to 5 percent over Christmas.

Next will post its full year results on 23 March.