Next raised its full-year profit forecast for the third time in four months and signaled that prices could start to fall next spring for the first time in at least two years.
The fashion and homewares retailer raised its annual profit forecast by £30m to £875m, saying better ranges, a sunny spring and pay rises for many of its customers had helped increase sales.
Full-price sales rose 3.2% in the six months to July – a much better performance than the expected 3% sales decline.
The retailer said its cost inflation was easing and as a result prices could fall next year.
Next said it benefited from sunny weather in May and June, which supported sales of summer clothing “at a critical time”, as well as improved online deliveries. The retailer had previously underestimated the positive impact of salary increases on its sales, he adds.
Profits were supported by lower-than-expected cost inflation as negotiations with suppliers were eased by lower global demand for raw materials, freight services and production.
Next expects full-year cost prices to rise 2% this fall, up from 3% previously forecast.
The company added that introducing new models more frequently and adding more items in the middle and upper end of its price bracket had helped it attract a wider audience.
“Fashion has always been about newness, but it seems to us that trends evolve more quickly. Customers are ready to embrace new looks faster than they have been in some time,” the company said in an update to the City.
In the first half, Next’s total sales increased by 5.4% to £2.5 billion, with online sales up 5% and in-store sales up 0.5%. Sales also increased 28% thanks to its total platform program, which includes brands such as Gap, Victoria’s Secret and Made.com. Profits rose 4.8% to £420 million.