Next has raised its full-year profit forecast after a stronger-than-expected third quarter, as online and international demand helped offset a slowdown in UK growth.
In the 13 weeks to the 25th October, the retailer’s full-price sales rose 10.5% compared with the same period last year – well ahead of its earlier forecast of 4.5% growth and generating an additional £76 million in revenue.
The results were fuelled by gains both in the UK and overseas.
Domestic sales climbed 5.4%, outperforming expectations of 1.9% growth, while international sales surged 38.8% – a significant acceleration on the 28.1% rise achieved in the first half and nearly double the company’s guidance of 19.4%.
The FTSE 100 constituent credited the international momentum to a combination of higher digital marketing returns and an improved stock operation in Europe after consolidating warehousing with Zalando’s logistics arm, ZEOS.
The retail giant said its digital marketing spend in the third quarter was up 50% compared with guidance, driven by the strength of returns.
It also highlighted that better stock availability this year, following last year’s supply chain disruptions in Bangladesh and global freight delays, had a bigger positive impact on sales than expected.
Next has now upgraded its full-year profit before tax forecast by £30m to £1.135 billion, up 12.2% year-on-year.
It also lifted its fourth-quarter sales guidance from 4.5% to 7%, adding a further £36m in forecasted sales.
For the full year, the company expects full-price sales of £5.55bn, total group sales of £6.87bn and earnings per share of 729.4p.
Its full-year guidance excludes the benefit of an additional 53rd trading week, which is expected to contribute roughly £20m in profit and will be reported separately in year-end results.
Despite a weaker UK performance compared with the first half, the Leicester-headquartered firm’s results showed strong international performance.
It said digital marketing efficiency and supply chain improvements have all helped it outperform expectations heading into the crucial Christmas period.
On the back of the announcement, its shares had risen 7.16% by 10:53am to 14,365p.
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