Next raises annual profit forecast to £860m after sales boost

theguardian.com:

Next has raised its annual profit forecast after sales were boosted by the warm weather and people buying outfits for weddings and other social events, but warned of a slowdown in the coming months caused by the cost of living crisis.

The clothing and homewares chain said sales of full-price items rose 5% in the three months to 30 July, compared with the same period a year earlier. “Many product trends have returned to pre-pandemic norms: Lockdown winners such as home and sportswear retreated, while formalwear returned to favour,” Next said.

However, the company said sales had been boosted by an unusually warm summer, but added that the impact of high inflation on consumer spending was “likely to worsen in the second half”. It increased its prices in the first half of the year by 3.7%, and plans further rises of 8% in the second half – 6.5% for fashion and 13% for homeware.

Sales were better than expected because of the hot spell in June and July, and because of a “marked return to formal dressing”, driven by an increase in social events. The sales performance prompted Next to raise its full-year profit estimate by £10m to £860m, which, if correct, would be 4.5% higher than last year.

Next stores have also benefited from the closure of a number of competing outlets in the last three years, the company said, adding that sales were 4.7% higher than pre-pandemic levels.

The chain, which is considered a bellwether for the UK economy, does not expect its recent sales performance to continue into the second half of the year as customers rein in spending. Next is sticking to its sales growth forecast of 1% for the rest of the year.

The company said the return rates on items had gone up again and were close to pre-pandemic levels at