Next lifts profit expectations after first-half beat

* First (Other OTC: FSTC - news) -half full-price sales up 3.5 pct

* Firm raises full-year profit guidance by 1.9 pct

* Announces third special dividend of year

* Shares (Berlin: DI6.BE - news) rise up to 2 pct (Adds details, analyst comment, shares)

By James Davey

LONDON, July 28 (Reuters) - Next (Other OTC: NXGPF - news) , Britain's second-largest clothing retailer, nudged up its annual sales and profit forecasts after beating its own guidance for first-half sales growth, boosted by warm weather in June and July.

Shares in the firm, which trades from more than 500 shops in Britain and Ireland (Other OTC: IRLD - news) , about 200 mainly franchised stores overseas and the Directory catalogue and internet business, rose up to 2 percent on Tuesday -- near to their record high -- after it also said it would pay another special dividend, its third this year.

Next has outperformed peers for a decade due to a strong online business, rapid expansion at home and abroad and diversification into new product areas, such as homewares.

It said full-price sales rose 3.5 percent in the 26 weeks to July 25, ahead of company guidance of flat to up 3 percent, and first-quarter growth of 3.2 percent.

Full-price sales from stores were up 0.8 percent, while Directory sales were up 7.5 percent. Despite the solid trading, the firm said consumer demand was volatile over the six months.

"We believe the improvements experienced at the end of the season were mainly driven by warmer weather," it said.

Earlier this month, rival Marks & Spencer (Other OTC: MAKSF - news) posted a 0.4 percent fall in underlying sales for the quarter ending June 27 for general merchandise, which includes clothing.

"Next's full-price trading stance means it was more than able to offset a weak May, and we believe this will once again result in a better gross margin out-turn relative to clothing peers," said Investec (LSE: INVP.L - news) analyst Alistair Davies.

Next raised the mid-point of its profit guidance for the 2015-16 financial year by 1.9 percent to 825 million pounds ($1.3 billion), which it said was close to analysts' current consensus forecast.

It also increased its full-year sales growth guidance to 3.5-6 percent, from 1.5-5.5 percent previously.

Shares in Next, up 17 percent over the last year, were 140 pence higher at 7,643 pence at 0738 GMT, valuing the business at 11.7 billion pounds. The stock hit a record high of 7,730 pence on July 21.

The firm has a well-established policy of returning surplus cash to shareholders through share buybacks or special dividends.

Tuesday's announcement of a special dividend of 90 million pounds, or 60 pence a share, follows similar payouts announced in February and April.

($1 = 0.6421 pounds) (Editing by Mark Potter)