British fashion and homewares retailer Next has raised its full-year profit expectations for the third time in the last four months. Additionally, the company has indicated that prices may start to fall as early as next spring, marking the first decline in at least two years.
Next increased its annual profit guidance by £30 million ($37 million), bringing the total to £875 million ($1.2 million). The upward revision was attributed to improved product ranges, favorable weather conditions during the spring season, and pay raises for a significant portion of its customer base, which collectively contributed to increased sales.
During the six months leading up to July, Next reported a 3.2 percent rise in full-price sales, surpassing expectations and outperforming an anticipated 3 percent decline in sales. The retailer cited a reduction in cost inflation as the reason behind its potential price reductions in the coming year.
Next specifically mentioned the positive impact of sunny weather in May and June on sales of summer clothing, particularly during a crucial period. The company also credited its enhanced online delivery services as a contributing factor to its strong performance. Additionally, Next acknowledged that it had previously underestimated the sales boost resulting from pay raises for its customers.
Profits received further support from lower-than-expected inflation on costs, a result of eased negotiations with suppliers due to reduced global demand for commodities, freight services, and production.
Next anticipates that full-year cost prices will increase by 2 percent this autumn, down from the previously estimated 3 percent.
The retailer revealed that its strategy of introducing new designs more frequently and expanding its product offerings in the middle and upper price segments had broadened its appeal to a wider audience.
Next commented on the changing pace of fashion trends, noting that customers are increasingly willing to adopt new looks more rapidly than in the past.
In the first half of the year, Next reported a 5.4 percent increase in total sales, reaching £2.5 billion, with online sales rising by 5 percent and in-store sales experiencing a 0.5 percent uptick. The company also noted a significant 28 percent growth in sales via its total platform scheme, which includes brands like Gap, Victoria’s Secret, and Made.com. Profits rose by 4.8 percent to £420 million.