Clothing-to-homewares seller Next (NXT) nudged up FY27 profit guidance again on the back of forecast-beating Q1 sales.
The upgrade was delivered despite Middle East-induced cost increases. The high street retailer said these will be fully offset by cost savings and ‘moderate’ price increases.
Shares in Next ticked higher on the positive news. However, with tougher H2 comparatives to come, Next left its FY27 full-price sales guidance unchanged at 5%.
Retail resilience
Led by CEO Simon Wolfson, Next has a track record of under-promising and over-delivering. And the retailer’s winning streak of earnings upgrades continues.
Next’s full-price sales rose 6.2% in Q1, ahead of the retailer’s 4% forecast. This generated an extra £28 million of revenue than expected. This sales ‘overachievement’ was driven by ‘exceptionally strong’ 11.8% sales growth in the first five weeks of the year, before the Iran war disrupted international operations.
The outperformance added £8 million of profit, and prompted Next to raise FY27 pre-tax profit guidance from £1.21 billion to £1.218 billion. That implies solid 5.2% year-on-year growth.
War impact worsens
UK sales grew by a better-than-expected 4.4% in the quarter to 2 May. Double digit online growth, in the UK and internationally, more than offset a decline in UK retail store sales.
Next warned the total cost impact of the Middle East conflict is expected to be £47 million this year. That is up from the £15 million guidance given with the FY26 results in March.
The updated outlook assumes that fuel costs remain at or around current levels. And that disruption in factories and global transport networks ‘neither worsen or improve’.
A prolonged Middle East conflict will push up prices and dent consumer demand. Nevertheless, Sharesify remains confident Next can navigate its way through the latest retail sector storm.
And it should emerge with even greater market share.
Steered by one of the best management teams in the business, the FTSE 100 retailer remains a cash flow monster. Next continues to return capital to shareholders through progressive dividends as well as earnings-enhancing buybacks.
Read the press release here: https://www.nextplc.co.uk/investors
You might also like these stories:
