Next profit off M&S cyberattack and warm weather

Next has significantly upgraded its annual sales and profit forecasts, attributing the stronger-than-expected performance to favourable weather and disruption faced by rival Marks & Spencer.

The fashion and homewares retailer reported a 10.5 per cent surge in full-price sales for the second quarter to 26 July, contributing to a 10.9 per cent rise for the first half of the year.

UK sales climbed 7.8 per cent in the second quarter, boosted by what the group described as “better than expected weather and trading disruption at a major competitor.”

M&S was forced to halt online trading for nearly two months from mid-April following a major cyber attack.

Consequently, Next now anticipates full-year sales growth of 7.5 per cent and profits to increase by 9.3 per cent to £1.11 billion, an uplift from its earlier projections of 6 per cent sales growth and 6.8 per cent profit increase.

The upgrade marks the group’s third in just five months.

But Next said it “remains cautious for the second half”, stressing that the improved outlook is for its international arm over the next six months.

It said: “In the UK, we believe we exceeded expectations in the second quarter as a result of better summer weather and trading disruption at a major competitor.

“We do not expect either of these factors to have a material effect in the second half, and so we are not increasing our guidance for UK sales in the second half.”

It believes sales growth in the UK will slow sharply to 1.9 per cent as the jobs market starts to falter following the Government’s move to hike National Insurance contributions for employers, at the same time as rising the minimum wage.

Next said: “We expect UK employment opportunities to continue to diminish as we enter the second half, with the effects of April’s National Insurance changes continuing to filter through into the economy as the year progresses.

“We believe that this will increasingly dampen consumer spending as the year progresses.”

But an online marketing push for its international arm is bearing fruit, helping drive sales 28.1 per cent higher in the first half and with growth of 19.4 per cent now expected in the final six months.

The results come after Next announced late on Wednesday that it had bought Seraphine – the maternity fashion firm, whose clothes were worn by the Princess of Wales during her pregnancies – after it recently collapsed into administration.

Next paid £600,000 for the brand and announced it was bringing back Seraphine’s founder Cecile Reinaud as an adviser to help relaunch the fashion label.