Investor expectations 'sky-high' for NEXT ahead of half-year results

Investor expectations are "sky-high" for NEXT's half-year results, due on 17 September. This follows the retail giant's latest financial update, which showed that surging summer sales driven by hot weather and a release of pent-up demand in the Middle East helped it beat expectations.

In August, the fashion, beauty and homeware retailer had lifted its profit outlook for the second time this financial year as a result of the stronger-than-expected second quarter.

Total full-price sales, which exclude discounts and clearance items, increased by 9.2% over the 13 weeks to 1 August, compared with the same period last year. That made it a 4% increase compared with what the retailer had forecasted for the period.

NEXT said the “over-performance” was partly due to the weather in the UK being warmer than anticipated, with temperatures in June and July soaring, as well as increased spending on profitable marketing campaigns.

It also pointed to the release of pent-up demand in the Middle East and Northern Europe following a weaker start to the year for both regions.

It had previously predicted full-year pre-tax profit to be £25 million above previous estimates at £1.24 billion, which would be 7.3% higher than the year before.

Next week, the retailer is expected to confirm that sales grew by around 7.7% over the first half of the year. However, investors are hopeful that continued positive momentum will allow the company to deliver yet another improvement in its guidance next week.

Richard Hunter, Head of Markets at Interactive Investor, said: “Expectations will, as ever, be sky-high for NEXT, whose tendency to under-promise and over-deliver has led to an almost guaranteed profit upgrade, while leaving analysts scratching for new superlatives.

“The group’s second quarter update was no exception, with NEXT breezing past its own estimates and raising its profit guidance for the year as a whole.”

Aarin Chiekrie, Equity Analyst at Hargreaves Lansdown, added: “That outlook may prove overly cautious, given NEXT’s core middle-aged and middle-income customers are proving relatively resilient in the current economic climate.

“As a result, further small guidance upgrades over the second half can’t be ruled out.”

But NEXT, which also owns brands including FatFace, Cath Kidston and Made.com, is still expected to report a dip in sales from its stores for the year so far, as high street footfall comes under pressure on cautious sentiment among shoppers.

In its latest financial update in August, the retailer shared that while in the UK sales were up by 2.8% for the quarter, it was online shopping that drive the increase, while store sales decreased.

Yet NEXT continues to invest and expand its physical retail network, most recently relocating and refitting its Cribbs Mall store in Bristol to create a 47,000 sq ft fashion space alongside the region’s first standalone Bath & Body Works location.

The Cribbs project followed shortly after NEXT unveiled its largest UK store at Bluewater in Kent. The 132,000 sq ft anchor spans two floors and has 83,000 sq ft of trading space, bringing together womenswear, menswear, childrenswear and home. It also has a Costa café and a Bath & Body Works concession with its own entrance.

NEXT wins key equal pay appeal

Earlier this week NEXT made headlines after it won a key part of its appeal against an equal pay ruling, after the Employment Appeal Tribunal found that higher pay for warehouse workers was justified.

However, workers retained several findings against the retailer relating to other pay practices.

According to the Financial Times, the Employment Appeal Tribunal has ruled that NEXT was justified in paying warehouse workers higher basic hourly rates than its predominantly female store workers, overturning part of a 2024 ruling that had strengthened a multibillion-pound equal pay battle across the UK retail sector.