Next sales boosted by hot summer

BBC News
Next Next chief Lord Wolfson voted in favour of Brexit

This summer's heatwave led to stronger-than-expected sales at Next in the first six months of the year, the clothing retailer has said.

As a result, Next said it was raising its profit forecast for the year as a whole by £10m to £727m.

However, the company said the UK retail market remained "volatile" and it remained "cautious" in its outlook.

It also highlighted key Brexit-related risks to its business, including higher tariffs on goods imported into the UK.

But it said queues and delays at UK and EU ports as a result of increased customs declarations for other companies posed the biggest risk.

The retailer said it was preparing for the possibility that the UK leaves the EU without a transition period or a free trade agreement in place.

However, it downplayed the impact a no-deal outcome would have on its business.

Share boost

Next's better-than-expected results come in contrast to some of the downbeat news from other High Street retailers, and sent its shares up 8% in early trade.

The retailer said full price sales in the first six months of the year beat expectations, rising by 4.5%.

However, the trend of sales moving online and away from High Street stores continued. Retail sales fell by 6.9% to £925.1m, but online sales jumped 16.8% to £892.3m.

Profit before tax rose by 0.5% to £311.1m, while total group sales were up 3.8% to £1.98bn.

"When we issued our August Trading Statement we believed that there was a high risk that the sales gained in July would be offset by losses in August. As it turned out, we did not experience any material loss of sales in August or early September," said Next chief executive Lord Wolfson.

However, he added: "The UK retail market remains volatile, subject to powerful structural and cyclical changes. Many of these headwinds have not abated. As expected, sales in our stores (which now account for just under half of our turnover) continue to be challenging."

Brexit planning

Next said it was "well advanced" in its preparations in case neither a transition period nor a free-trade agreement were in place by the time of Brexit next March.

But it said the no-deal risks did not pose a "material threat to the ongoing operations and profitability" of Next in the UK or EU.

Next said in the "unlikely event" that free-trade agreements were not put in place, the cost of goods could rise by up to about £20m, which would add less than 0.5% to its prices.

The company said it would be "in the interest" of both the UK and remaining EU nations that the UK's departure from the EU was "carefully managed, accompanied by a period of transition and some form of agreement for free trade".

It added at this stage there was no certainly of such an agreement.

"There are significant challenges involved in preparing for a no-deal outcome and we would not want to understate the work we are doing to prepare for this eventuality.

Last year, Lord Wolfson, who voted in favour of Brexit, warned that failing to secure a "smooth" departure from the EU could result in "years of economic decline" for the UK.

At the time he said he still believed Brexit would boost trade and the British economy, but he also warned that it could cause high unemployment if managed badly.