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Next raises profit guidance £20m after strong first quarter

Next has increased profit guidance for the year by £20m, following a strong first quarter in which sales beat expectations.

Total group sales for the 13 weeks to April 26 were up 10.8%, of which 2.2% came from opening new space. Next retail sales were up 8.8% and Next Directory was up 13.7%.

Full-year guidance for pre-tax profit has now been revised upwards to between £750m and £790m, from the original estimate of £730m to £770m. Total sales growth has also been revised from the previous prediction of between 4% and 8% to an increased 5.5% to 9.5%.

Next said the revised sales figures “might look conservative in the light of the first quarter’s performance. However, we always expected the first quarter to show above-average sales growth as the comparative period last year suffered from a particularly cold spring and Easter holiday period.”

Competitors praised Next for its continued outperformance.

The chief executive of one retailer told Drapers that Next had become “a highly efficient machine that has everything sorted from end to end. They’re running their business far more efficiently than their competitors.” The source cited “aggressive space acquisition and two seasons of very strong product” as further drivers of growth.

Rival Debenhams set out plans to catch up with competitors such as Next in terms of the convenience of its multichannel offer when its half-year results were announced on 15 April.

Another retailer said: “If you talk to anyone at Next they are not really bothered with market share, but at M&S they are absolutely obsessed with it – if Tesco or Primark are doing well, for example, it’s all about ‘how do we get after them’. Whereas Next are just focused on giving their customer what they want. They don’t take their eye off the ball.”

He added that journey consistency was also strong at Next, with the website, catalogue and in-store merchandising matching up, and that the catalogue culture meant outfits were created “inherently” rather than put together at the end of the process.

Kate Ormrod, retail analyst at Verdict Retail, said the challenge now was for Next “to build on that growth for the next quarter … it needs to continue to improve its delivery and bring out timely product to maintain its advantage. Competitors are now striving to better them.”

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