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Next tipped for profit drop

Retail giant Next is reportedly expected to post a fall in full-year profits when it reports its results later this week.

The consensus among City analysts is that Next will see an 8% fall in earnings to £725m.

However, some have predicted its outlook will brighten in the year ahead. George Salmon, equity analyst at Hargreaves Lansdown, said it ”has improved” for next year.

Salmon said: “The group expects sales growth to firm up as online continues to deliver good results. Meanwhile cost inflation is expected to ease, and then disappear, over the course of 2018.

”All that bodes well – higher sales and higher margins mean doubly higher profits in the longer term. If all goes to plan the group expects to deliver £300m of spare cash next year, which it has suggested could be spent on a buyback.

“However, retail still accounts for a huge slice of sales, and with conditions remaining tough, it’s likely to be far from plain sailing.”

Michael Hewson, chief market analyst at CMC Markets UK, remarked its online business has helped to “offset the woes of the physical stores”, but added that forecasts could be adjusted this week given the recent weather conditions.

The news comes after the retailer upgraded its profit forecast in January, on the back of an uplift in overall sales over the festive trading period.

Full-price sales at Next were up 1.5% during 1 November to 24 December, thanks to “much colder” weather.

As a result of the improved performance, full-year central guidance for group profit grew by £8m to £725m, with the profit guidance range between £718m to £732m. However, the figure is down from last year’s equivalent of £790.2m.

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