Spotlight on Next for plans to weather tougher year-end after first-half boost

Next will report back after a bumper first half helped by troubles at cyberattack-stricken rival Marks & Spencer, but the focus will shift to how the group will weather a tougher end to the year.

Thursday’s half-year figures follow the fashion and homewares giant’s move to nudge up its annual sales and profit outlook again in July after trading was buoyed by hot weather and disruption at M&S.

M&S had to suspend online trading for nearly two months from mid-April after it was hit by a major hack.

As online shoppers defected to competitors, Next’s UK sales jumped by 7.8% in the second quarter, helping deliver growth of 7.6% overall in the half-year to July 26.

Group-wide it saw full-price sales rise 10.5% in the second quarter to July 26, with first-half growth of 10.9%.

Next said the recent performance and predictions for better-than-forecast second-quarter trading mean it expects full-year sales to rise by 7.5% and profits to increase by 9.3% to £1.11 billion – its third upgrade in five months.

It had previously pencilled in sales growth of 6% and for profits to lift by 6.8% to £1.08 billion.

But with M&S’s issues resolved, there are fewer “tailwinds” to help Next over its second half, according to Aarin Chiekrie, equity analyst at Hargreaves Lansdown.

He said: “Investors will want clarity on how the group plans to navigate a more challenging second half.

“The company has cautioned that UK employment may weaken as the impact of April’s national insurance increase filters through the economy, potentially dampening consumer spending.

“Additionally, the tailwinds in the first half from favourable weather and M&S’s technical troubles are now expected to fade.

“The key question remains whether Next’s strength in digital marketing and international expansion can continue to offset mounting macroeconomic pressures and the slow-burning decline of the UK high street.”

Next, led by Lord Simon Wolfson, cautioned previously that it expected sales growth in the UK to slow sharply to 1.9% as the jobs market falters.

This is in reaction to the Government’s move to hike national insurance contributions for employers at the same time as raising the minimum wage, according to the group.