Next set to reveal heatwave boom in HY sales

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Next sales

Next is thought to be on track to reveal a higher interim profit than expected tomorrow morning, when it reports back on the first half of trading for its financial year.

The high street retailer could be in line for a rebound in sales thanks to the summer’s heatwave and weak comparables from the year before.

Analysts at Jefferies said they expect a 4 per cent increase in underlying earnings, with Next’s catalogue and online shopping business rising 15 per cent.

Group profit before tax is thought to come in at £320 million, up from £309.4 million for the same period last year.

“On balance, we expect much less volatility around Next’s earnings expectations, as opposed to what is set to remain a much more wide-ranging valuation debate,” analysts at Jefferies said.

“We cannot help but think that the latter will remain hostage of the impending Brexit process, at a time when UK consumers are still reluctant to spend, given a lack of visibility as we approach March 2019,” the analysts added.

Next has already reported better than expected sales growth in its second quarter, thanks to the run of warm weather during the summer.

Despite the encouraging results, physical stores still remain a bone of contention for Next, who saw a 5.9 per cent drop in bricks and mortar store sales in its second quarter this year.

Analysts believe this will also drag down results for Tuesday’s announcement, which could come in with a 21 per cent drop in underlying earnings for its retail arm.

In August, Next chief executive Lord Wolfson warned that a long heatwave could negatively impact sales.

“People stop buying summer clothes at the end of summer, because they know you haven’t got long to go until autumn,” he said.

Wolfson added that the consumer mood was likely to remain “subdued” for the rest of the year.

Meanwhile Graham Spooner, investment research analyst at The Share Centre, said the results would be watched with interest given the “clouds” gathering over the clothing retail sector.

“Investors will also be looking even more intently at the company’s high street sales given the recent news from John Lewis of a 99% collapse in first half profits due to increased discounting,” Spooner added.

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