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Next Lifts Profit Target as First-Half Sales Beat Estimates

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Aug. 1 (Bloomberg) -- Next Plc, the U.K.’s second-largest clothing retailer, increased its annual profit forecast after reporting first-half sales that rose more than analysts estimated, driven by a surge in online and catalog sales.

The shares rose to a record in London trading after the Leicester, England-based company said pretax profit in the fiscal year through January 2013 will increase to as much as 620 million pounds ($976 million), compared with a previous maximum target of 610 million pounds.

Next reported a 4.5 percent increase in sales under its own brand, driven by a 13 percent gain at the Directory unit, which includes online and catalog sales. Next’s performance belies difficulties in the national retail market, which included the wettest June since 1910. That curbed spending on summer fashions in the U.K., where retail sales rose 0.1 percent in the month, according to the Office of National Statistics.

“Next deserves a gold medal for its remarkable achievement in topping expectations and edging up its full-year guidance, despite a very difficult three months in fashion retailing,” Nick Bubb, an independent retail analyst, said by e-mail.

The shares rose as much as 5.8 percent to 3,406 pence, the steepest intraday gain since Nov. 2. They were up 5.3 percent at 9:43 a.m., boosting the company’s market value to 5.6 billion pounds and re-establishing its lead over competitor Marks & Spencer Group Plc, which has a value of 5.4 billion pounds.

Sales Forecast

The increase in Next brand sales in the 26 weeks ended July 28 exceeded the 2.1 percent median estimate of seven analysts compiled by Bloomberg. For the year, the retailer said it now anticipates sales growth of 2 percent to 4.5 percent, up from a previous forecast of 1 percent to 4 percent.

“It’s a very decent all-round performance,” said Richard Cathcart, an analyst at Espirito Santo in London. He has a neutral recommendation on the stock.

Next, the official formalwear sponsor of the London 2012 Olympics, said it has spent about 112 million pounds buying back shares so far this year and still intends to repurchase about 200 million pounds of stock over the year as a whole.

To contact the reporter on this story: Sarah Shannon in London at sshannon4@bloomberg.net

To contact the editor responsible for this story: Celeste Perri at cperri@bloomberg.net

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