Britain's top clothes seller Next lifts profit guidance again

By Louis Goss

Next Plc, the U.K.'s largest clothes seller by revenue, has lifted its profit guidance for the second time this year on the back of surging sales in its overseas divisions.

The British retailer increased its profit guidance by GBP15 million ($20 million), to GBP995 million for the financial year ending in January 2025, as it said its sales in the first six weeks of the second-half of this year had "materially exceeded" expectations.

Next posted an 8% increase in its sales in the first half of the year to GBP2.95 billion, in what led to a 7.1% increase in its pre-tax profits to GBP452 million. The retailer had previously lifted its profit guidance from GBP960 million to GBP980 million in August.

Shares in Next (UK:NXT), listed on the London Stock Exchange, increased 2% on Thursday having gained 50% over the previous 12 months on the back of a series of strong results throughout 2024.

The clothes seller's sales were boosted by a sharp 22.8% increase in its overseas sales including through its partnerships with local third-party retailers including Nordstrom (JWN) in the U.S, Myntra in India and Zalando (XE:ZAL) in mainland Europe.

Next's surging overseas sales helped offset slower growth in the U.K., where sales via the company's own brand through its own shops and website actually fell 0.9%, to GBP1.3 billion.

The high street retailer which sells everything from workwear to fashionable jackets blamed the underperformance in its U.K. brand on harsh comparison compared to last year when sales surged due to warm summer weather.

Third Bridge analysts led by Alex Smith said Next, which was first started in the northern English city of Leeds in 1864, could now achieve significant growth outside the U.K., "particularly in India, where the growing middle class presents a massive market for Western brands."

Next have increased advertising spending sharply in recent years from sums of just GBP8 million across 19 countries in 2020/21 to an expected GBP41 million in 43 countries this year.

Richard Hunter, head of markets at Interactive Investor, explained that Next believes its business could be boosted internationally by the convergence of global fashion tastes in countries across the globe.

"[Next] believes international tastes in clothing are beginning to converge, not least of which is due to the increasing visual power, appeal and presence not just of the internet, but also the rise of streaming services," Hunter said.

-Louis Goss

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09-19-24 0446ET

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