The sun shone on high street retailer Next (LON:NXT) during the three months to the end of April, with sales of its own-brand goods up significantly better than expected at 5.2% - excluding VAT. The figures compare favourably to guidance set out in March when the fashion group forecast half-year sales of between -0.5% and +2.5%. It estimated that at least 2.5% of the over-performance came as a result of exceptionally warm weather over Easter and spending in anticipation of the Royal Wedding Bank Holiday. It reckons those factors encouraged consumers to bring forward summer purchases and, as such, are not likely to be sustained in the second quarter. Nevertheless, the company upped its own-brand sales guidance for the first half to somewhere in the range of +1.5% to +4%. As a result, the Next share price surged by 98p to 2,320p.

Looking closer at the figures, retail sales increased by + 0.9% as a result of better ranges and improved stock availability on best-selling lines, particularly in the Womenswear division. Meanwhile, directory sales were up by 14.8% as a result of an improved delivery service, more aggressive marketing and better stock availability. Next said gross margins and costs remained well controlled and in line with internal budgets.

As usual for Next, which tends to stress the downside risks when issuing guidance, the company said it remained cautious for the full year given that there had not been a significant change in the underlying economic environment. It said the combined effects of the public sector deficit cuts and continued inflation in essential commodities were all likely to restrain growth in consumer spending generally. In addition, the ongoing effects of increases in its own selling prices are also likely to moderate demand for its products, it added. Price increases are expected to be marginally higher in the second half than in the first, at around 8%.

On a brighter note, the company pointed out that it was up against softer comparative numbers in the final quarter. Last year this important period was adversely affected by snow, which it is hoping will not recur in the year ahead. It added that there was every chance that inflationary pressure on the consumer will ease towards the end of the year, as commodity price increases begin to annualise.

Looking ahead, the group estimated…

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