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UK’s Next Raises Profit Outlook Again

A shopper enters a Next store on Oxford Street in London, Britain, July 31, 2023. REUTERS/Hollie Adams/File Photo
A shopper enters a Next store on Oxford Street in London, Britain, July 31, 2023. REUTERS/Hollie Adams/File Photo
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UK’s Next Raises Profit Outlook Again

A shopper enters a Next store on Oxford Street in London, Britain, July 31, 2023. REUTERS/Hollie Adams/File Photo
A shopper enters a Next store on Oxford Street in London, Britain, July 31, 2023. REUTERS/Hollie Adams/File Photo

British clothing retailer Next on Wednesday raised its full-year profit outlook for the fourth time in six months as it reported better-than-expected sales in a third quarter heavily impacted by variable weather.
The group, which trades from about 460 stores in the UK and Ireland and has an online presence in over 70 countries, is often considered a useful gauge of how British consumers are faring. Its shares were up 2.6% in early trading, extending 2023 gains to 21.4%, Reuters reported.
Next said full price sales rose 4.0% in the quarter to Oct. 28, ahead of guidance for a 2% rise. Online sales increased 6.5%, while store sales fell 0.6%.
The group said sales benefited from a cooler-than-average August and typical autumnal weather in late October, but were depressed by a warmer-than-average September.
"We believe the volatility in sales performance is a result of changing weather conditions rather than any underlying changes in the consumer economy," it said.
Despite cost of living pressures, UK consumer demand has generally held up this year.
However, official data published last month showed British retail sales volumes fell more than expected in September, partly because unseasonably warm weather reduced sales of autumn-wear clothing.
Britain experienced its joint-hottest September on record, part of a heat wave which rival fashion retailer H&M said had depressed sales across much of Europe.
Next said it now expected pretax profit before exceptional items for the year to January 2024 of 885 million pounds ($1.08 billion), ahead of previous guidance of 875 million pounds and the 870.4 million pounds made in 2022/23.
It is assuming that full price sales for the rest of the year will be up 2.0%.
Analysts at Liberum said they were optimistic on Next's prospects, noting its "strong cash generation, management foresight, tech capabilities and new more efficient distribution center capacity allows it to explore multiple new avenues for growth".
Next expects inflationary headwinds to continue to ease in its 2024/25 year, but has cautioned that a softening of the labor market may dampen growth in consumer demand.

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Fashion

Kering Posts 11% Drop in Q2 Sales, Sees Weak Second Half

The logo of luxury brand Gucci is seen in Tokyo on June 22, 2021. (AFP)
The logo of luxury brand Gucci is seen in Tokyo on June 22, 2021. (AFP)
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Kering Posts 11% Drop in Q2 Sales, Sees Weak Second Half

The logo of luxury brand Gucci is seen in Tokyo on June 22, 2021. (AFP)
The logo of luxury brand Gucci is seen in Tokyo on June 22, 2021. (AFP)

Kering reported a bigger-than-expected drop in second-quarter sales and forecast a weak second half, as the French luxury group struggles to revive its key label Gucci and worries grow about a prolonged downturn in high-end spending.

Sales at the French luxury group which owns labels Gucci, Boucheron and Balenciaga, fell to 4.5 billion euros ($4.9 billion), an 11% drop on an organic basis, which strips out currency effects and acquisitions.

The figure was below analyst expectations for a 9% drop, according to a Visible Alpha consensus.

It also said second-half operating income could fall by around 30%, following a 42% drop in the first half.

Sales at Gucci fell 19%, showing no improvement from the first quarter, and below analyst expectations for a 16% decline, according to a Visible Alpha consensus.

Kering has been revamping Gucci, the century-old Italian fashion house which accounts for half of group sales and two-thirds of profit.

Minimalist designs from new creative director Sabato de Sarno, which began trickling into stores earlier this year, are key to the design reset and push upmarket, in a bid to cater to wealthier clients who are more immune to economic headwinds.

Kering chief financial officer Armelle Poulou told reporters that the designs had been well received and the rollout was on track.

But the efforts have been complicated by a downturn in the global luxury market, while China's rebound - traditionally Gucci's most coveted market - was clouded by a property crisis and high youth unemployment as Western markets came down from a post-pandemic splurge.

Earnings from sector bellwether LVMH on Tuesday missed expectations as sales rose 1%, offering few signs that a pickup is around the corner, sending shares in luxury goods companies down on Wednesday. Kering traded at its lowest level since 2017.