Next on course for improved first half after heatwave sales boom
The clothing retailer is expected to hold forecasts steady despite high street crisis.
High street retailer Next is expected to report higher interim profit on Tuesday, against a turbulent backdrop in the clothing retail sector.
The fashion and homeware chain is set for a rebound in part thanks to weaker performance this time last year, as well as a recovery in full price sales.
Analysts at Jefferies expect a 4% increase in underlying earnings, though this accounts for a 21% drop in the retail arm. In directory, Next’s catalogue and online shopping business, earnings are set to rise 15%.
On balance, we expect much less volatility around Next’s earnings expectations, as opposed to what is set to remain a much more wide-ranging valuation debate Jefferies analysts
Group profit before tax is seen at £320 million, an increase on £309.4 million this time last year.
“On balance, we expect much less volatility around Next’s earnings expectations, as opposed to what is set to remain a much more wide-ranging valuation debate,” analysts at Jefferies said.
“We cannot help but think that the latter will remain hostage of the impending Brexit process, at a time when UK consumers are still reluctant to spend, given a lack of visibility as we approach March 2019.”
Next reported better than expected sales growth in the second quarter, attributing its success to the run of warm weather.
Some investors were disappointed not to see any upgrades in the retailer’s full-year expectations at the last update. Next is expected to again reaffirm its full year outlook on Tuesday of £717 million in pre-tax profit.
In August, chief executive Lord Wolfson warned that a long heatwave could negatively impact sales.
“People stop buying summer clothes at the end of summer, because they know you haven’t got long to go until autumn,” he said.
He added that the consumer mood was likely to remain “subdued” for the rest of the year.
Graham Spooner, investment research analyst at The Share Centre, said the results would be watched with interest given the “clouds” gathering over the clothing retail sector.
“Investors will also be looking even more intently at the company’s high street sales given the recent news from John Lewis of a 99% collapse in first half profits due to increased discounting,” he said.