FTSE 100: Next posts higher sales despite cost of living squeeze
Clothing retailer Next (NXT.L) posted better-than-expected sales in its latest quarter, despite a sharp cost of living crisis hitting consumer spending.
The fashion chain said sales rose 0.4% in the three months to 29 October, slightly ahead of expectations compared to the same period last year. This included the benefit of interest income, which is generated from Next’s credit business.
It revealed this included a bounce from revenue at its UK and Ireland retail stores, which grew 3.1% over the quarter. This offset a 1.9% fall in online sales, which failed to keep up with elevated levels boosted by the COVID-19 pandemic last year.
Trade also picked up in recent weeks as shoppers started to buy warmer clothing for the winter period ahead.
Next maintained its pre-tax profit guidance of £840m for the current financial year, despite issuing two profit warnings during 2022 amid soaring inflation and a weak pound.
In its previous update it said that it “seems inevitable” that growth in the clothing and homeware sector “will slow if not reverse” as inflation hits consumer budgets. On Wednesday, it cautioned on the remainder of the year, with the group expecting sales to fall by 2%.
Analysts at Jefferies said the latest update reflected a "period of resilient consumer spend,” however, Adam Vettese of eToro, said: “Conditions are set for a disappointing Christmas period, with many households starting to feel the cost-of-living crisis begin to bite.”
The retailer hiked prices across its autumn and winter ranges by 8%, while shares rose more than 2% in early trading in London.
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Charlie Huggins, head of equities at Wealth Club, said: “After Next cut its sales and profit forecasts five weeks ago, the fact it's maintaining guidance today comes as a relief. However, this reasonable progress masks considerable weekly volatility.
“The last week of September shows sales up a stellar 11%, but in the middle of October sales fell by 3.7%.
“An element of sales volatility is to be expected for any retailer, with weather always playing a part. Even so, these are quite large fluctuations and may say something about the fragile state of the economy.”
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