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Next told the City to go back and upgrade its profit forecasts for 2009 today after a “better-than-expected first half” — even though it predicts no improvement in High Street sales in the second half.
Chief executive Simon Wolfson said that there had been a “slight improvement in the consumer environment, and favourable weather” in the six months to the end of July.
Next had also beaten its competitors, he said, by switching to a riskier but more profitable strategy in terms of the scale to which it translates catwalk fashion trends — like this year's cowl neck — quickly into cheaper versions in its stores.
Wolfson said that he had been right at the start of the year to predict that the consumer recession would not be as bad as some doomsters had warned.
He said: “Some assumed that a cataclysm in the financial markets would lead to a similar crisis in consumer markets. That was not the case.”
But similarly he is not following some commentators in predicting a swift recovery.
He said: “Most people, who kept their jobs, were relatively insulated from the financial crisis.
“But it is sensible to plan for 2010 on a more conservative basis. We are now looking at a longer period of recovery with grey skies ahead.”
First-half sales, on a same store basis, fell by 1.2% on the High Street, but rose by 1.7% over the internet and through catalogues.
Adding in new shops and international sales, Group sales were little changed at £1.51 billion. Pre-tax profits came in at the top end of City forecasts, up by 6.9% at £185.5 million.
The first-half dividend goes up 1p, to 19p a share.
Analysts had been forecasting profits of around £400 million for the full-year, but Next said this would now be closer to last year's total of £429 million. Next shares rose 38p to 1736p.
Wolfson said that despite the general view of a lousy summer, the weather in the last two weeks of May, the whole of June and the start of July — which is when most people replenish their summer wardrobe — had actually been better than usual, which added between 2% and 3% to first-half sales.
Similarly, the seasonal sale had been better than the previous year, with 19% less stock having to be marked down. But the coming New Year sale will be tougher, because Christmas Day falls on a Friday. Next traditionally opens its stores at 5am on 27 December for the sales, but this year it will shift that opening to Boxing Day.
Wolfson said: “We could not possibly cope with the kind of crowds that turn out for our sale if we began it on a Sunday, when you cannot open until 11am and can only stay open for six hours.”
That means Next will have to pay its staff more, and risks seeing lower overall clearance during the sale, if fewer punters turn out.
Assuming no great weather boost in the second half, Next expects second-half like-for-like High Street sales down between 3.5% and 6% and Directory sales between flat and up 2%.
