Countering gloomy trade predictions at the start of the year, high street fashion retailer Next has today posted a 5.2 per cent sales growth for its first quarter.
Estimates by the company in March put sales for the first half at between -0.5 per cent and +2.5 per cent but unexpectedly warm weather and the royal wedding have helped to boost business.
Retail sales grew by 0.9 per cent in the 13 weeks to April 30th and directory sales increased 14.8 per cent during the period, as summer clothing purchases were brought forward during the sunny Easter weekend.
A statement from Next today read: “We estimate that at least 2.5 per cent of the over performance came as a result of exceptionally warm weather over Easter and spending in anticipation of the royal wedding bank holiday.”
Next CEO Lord Wolfson was one of the first retail leaders to warn of the likely downturn in retail sales due to the government’s tackling of the deficit but yet again strict stock management has helped deliver better then expected results for the firm.
“We believe these factors have encouraged consumers to bring forward summer purchases and we do not expect the current levels of growth to continue into the second quarter. We now expect total Next Brand sales for the first half to be in the range +1.5 per cent to four per cent,” he explained.
Despite the good start to the year, Next still remains cautious over full-year estimates with commodity prices still expected to rise in the second half and consumer spending predicted to dampen somewhat.
Product prices at the retailer will rise around eight per cent during the second half of the year but comparitives will be helped by the poor trading over the Christmas period in 2010 due to adverse weather.
Profit-before-tax for Next is now expected to be £535 million to £585 million, around £15 million ahead of estimates made in March.
The statement continued: “Despite the strength in recent sales, we remain cautious for the full year given that there has not been a significant change in the underlying economic environment.
Wolfson added: “The combined effects of the public sector deficit cuts and continued inflation in essential commodities are all likely to restrain growth in consumer spending generally.
“On the plus side, we are up against softer comparative numbers in the final quarter. In addition there is every chance that inflationary pressure on the consumer will ease towards the end of the year, as commodity price increases begin to annualise.”
Next did not make reference to like-for-like (LFL) sales in its main statement because the rise in VAT and exclusion of online sales in these results would have given a “distorted” view.
It did admit, however, that LFL sales excluding VAT and online sales for the period dropped around three per cent, whilst LFL trading including both rose approximately 5.4 per cent.