Fashion chain Next hopeful for profits growth
UK fashion chain Next today said it remained on track to grow sales and profits this year, despite its fears of a post-election spending slowdown.
Next has been encouraged by trading in the 13 weeks to May 1, with high street sales up 2.8% and its Directory arm trading comfortably ahead of earlier hopes at 7.2% higher. Like-for-like sales including online business rose by 2.2%.
The company said it remained "very cautious" about the trading outlook, but added that with forecasts of a spending slowdown already taken into account it still expected another year of sales and profits growth.
It said profits for the year to January were on course to be near the top end of current City forecasts of between £525m (€614.15m) and £565m (€660.95m).
The fashion and homewares chain warned that trading over the rest of the financial year would be impacted by tougher prior year comparatives and the impact of action to tackle the country's budget deficit.
"Whatever form this action takes, it is likely that it will act to restrain growth in consumer spending," Next said in a trading statement.
Seymour Pierce retail analyst Freddie George, who has a buy rating on the stock, said there was still potential for earnings upgrades despite the company's cautionary comments on the outlook.
He added: "The company has a relatively strong balance sheet, has significant potential to grow internet sales overseas and has the directory business in the UK, which we believe has significant value."
Next enjoyed a resurgent performance in 2009 after it refocused the business to aggressively back new products and trends.
It made a series of profit upgrades throughout last year as sales continued to surprise on the upside, thanks also to improving consumer confidence and efforts to offset pricing pressures caused by the weak pound.
