Fashion chain Next has raised its annual profit outlook after seeing full-price sales up 5% over the past three months as warm weather boosts demand for summer apparel.
The group’s second-quarter sales performance topped expectations by £50m, and the chain raised its £10m annual profit guidance to £860m.
Total sales jumped 5% in the three months to July 30 from last year and jumped 23.8% from the same period in 2019 before the pandemic.
Costs are rising and we will have to pass them on to sales, which means that people will not buy as much as they did in the first half of the year.
Lord Simon Wolfson, Chief Executive of Next
In-store retailing has seen a “renaissance” as the growth of online shopping has stalled, the retailer said.
“If you haven’t been to an event or the office in three years, then the chances of needing to replenish your wardrobe are high,” Lord Simon Wolfson, Next’s chief executive, told the PA news agency.
“How enduring the high-end formal wear trend can be, however, remains to be seen.”
The post-pandemic resurgence in retail has also boosted formal wear sales as demand for social events increased while lockdown winners such as homewear and sportswear declined.
But Next expects the exceptionally hot weather to ease and the impact of rising inflation on consumer spending will worsen, hurting sales in the second half of the year.
“While we have yet to see any change in consumer buying behavior, we know that prices will go up and this will affect demand for new clothes,” added Lord Wolfson.
“Costs are going up and we’re going to have to pass it on to sales, which means people aren’t going to buy as much as they did in the first half of the year.”
As the summer draws to a close, the cost-of-living crisis will be harder on families across the country.
Richard Lim, Retail Economics
Earlier this year, Next warned that prices will rise by as much as 6% in the fall and winter as it struggled with rising freight costs and higher employee salaries.
But transport disruption has improved since the pandemic and some costs are coming down, Lord Wolfson told PA.
“After the pandemic, we saw shipping times extended by up to six months, but delays have now dramatically reduced and shipping speeds have improved,” he said.
Richard Lim, chief executive of consultancy Retail Economics, commented that Next reacted quickly to changes in consumer trends, but warned of waning demand for fashion in the coming months.
“As summer draws to a close, the cost-of-living crisis will be harder for families across the country.
“Consumers will look to delay, negotiate and cancel some purchases as the rising cost of essentials erodes any money left over at the end of the month.
“Apparel will be one of the areas that many consumers will look to to reduce their spending, making do with their current wardrobes, cutting back some areas or switching to cheaper brands and private labels.”