Next Plc, the U.K.’s second-largest clothing retailer, maintained its annual profit forecast after a first quarter in which the growth of the Directory home-shopping unit compensated for a weather-affected drop in store sales.
Pretax profit will be 560 million pounds ($907 million) to 610 million pounds, the Leicester, England-based retailer said today, compared with the prior year’s 579.5 million pounds.
Britain’s wettest April since at least 1910 hurt sales at Next stores, which declined 3.9 percent in the 13 weeks ended April 28, compared with the median estimate of six analysts surveyed by Bloomberg for a 3.6 percent drop. Total sales under the Next brand rose 1.4 percent in the period, boosted by a 12 percent increase in revenue at Next Directory.
Chief Executive Officer Simon Wolfson said he expects another year of “very subdued retail sales,” after voicing concern in March that U.K. consumer confidence may be hurt by faltering employment, tight credit availability and Europe’s debt crisis. Still, Next is opening online businesses in Russia and China to spur growth and said product costs, selling prices and profitability was little changed in the first quarter.
“Next has a proven strategy, strong management team, consistent financial performance, industry-leading multi-channel capabilities and international growth prospects,” Bethany Hocking, an analyst at Investec Securities, said in a note.
The shares rose 2.6 percent to 2,971 pence in London, the steepest gain since March 15 and the biggest advance in the U.K. benchmark FTSE 100 Index.
The last few weeks have been “difficult” as cold, wet weather deterred shoppers, Wolfson said. An index of U.K. retail sales fell in April, the Confederation of British Industry has said, adding that stores expect demand to rebound in May.
“Very little has changed since March,” Wolfson said today, adding that he expects the second half of the year to continue in much the same direction as the first. The London Olympics and Queen’s diamond jubilee celebrations “won’t make a lot of difference” to overall sales this year, he said.
The decline in first-quarter store sales was worse than the 2.7 percent drop reported for the period Aug. 1 to Dec. 24. The comparable period of last year was boosted by demand linked to the royal wedding of Prince William and Kate Middleton.