British retail chain Next has raised its full-year profit target after consumers rushed out to update their wardrobes amid unusually warm weather.
Full-year pre-tax profit is expected to come in at £717m, up from the previous estimate of £705m, the company said.
Next’s earnings upgrade bucks the gloomy trend on the high street. Superdry became the latest retailer to blame bad weather for its poor performance, while fashion retailer New Look has previously said it will close stores as more consumers shift their spending online.
“Sales in the first quarter were better than we expected and around £40m ahead of our internal forecast, boosted in recent weeks by unusually warm weather,” Next said in a statement.
Next warned it does not expect the strong performance to continue through the rest of the year.
Back in March, Next “anticipated that the sales performance in the first quarter would be flattered by the under-performance of our ranges in the same period last year, so we did not expect sales for the rest of the year to be as strong as the first quarter. We still believe this will be the case”.
However, investors welcomed Next’s candid statement, sending the stock up 7.6% in early trading.
“Few retailers would go to the lengths Next has to play down what are undoubtedly strong results, especially when UK retailers are facing such a tough environment,” Nicholas Hyett, equity analyst at Hargreaves Lansdown, said.
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“But there’s method in the madness. If, as Next seems to believe, the strong first quarter reflects shoppers pulling forward their summer purchases to take advantage of the recent warm weather, then Q1’s positive results will come largely at the expense of later quarters.
“That willingness to ‘say it as it is’ is one of the reasons we’ve remained upbeat about Next’s long-term prospects throughout the recent downturn.”