Next (NXT) has upgraded its profit guidance after an unexpectedly busy May. The retailer said wage inflation and the arrival of warm weather had driven demand for its products. Full price sales in the first seven weeks of its second quarter were up 9.3 per cent year on year, meaning Next beat its estimates by £93mn. (Management expected full price sales to fall by 5 per cent).
Looking ahead to the whole year, Next has upgraded its full price sales guidance by £137mn to £4.67bn and its profit guidance by £40mn to £835mn. This implies a 4.1 per cent fall in profit before tax, compared with the 8.7 per cent fall previously forecast.
“If recent pay rises and the sudden change in weather have indeed contributed to the current over-performance, then it is reasonable to expect that the effect will diminish over time because ongoing inflation will slowly erode the positive effect of annual pay increases,” Next said.
“This is why we are not anticipating the current performance to continue at the same level going forward, albeit we have moderately improved our guidance for the rest of the year.” JS
Read more: Can Next and M&S succeed where others have failed?
Pain for housebuilders ahead as rates hit 6 per cent
Pressure is piling on housebuilders' already depressed sales figures after data provider Moneyfacts revealed the average cost of a two-year fixed-rate mortgage breached 6 per cent. Ahead of the Bank of England’s meeting on Thursday, when many expect it will increase the base rate further, lenders including Barclays, TSB, Metro Bank, and Nationwide have pulled or amended their deals.
Earlier this month, housebuilders Crest Nicholson (CRST) and Bellway (BWY) suffered share price hits after releasing downbeat updates. Crest Nicholson's adjusted pre-tax profit more than halved as Bellway doubled down on its forecast for a drop in revenue in its next results. ML
Read more: How mortgage rate chaos will affect house prices
Lookers to be taken over for £465mn by private Canadian dealer
Lookers (LOOK) has announced its board has agreed the terms of a takeover bid from a privately owned Canadian car dealership, at 120p a share. Alpha Auto Group has offered to buy the company in an all-cash deal which values Lookers at £465mn.
This represents a 35 per cent premium to the closing price yesterday, and the shares climbed a third in response. Lookers’ board said it would recommend the deal to shareholders, and that the buyer had already received backing from investors representing 42 per cent of the company’s share count. This includes 19-per-cent shareholder Constellation Automotive, which bought in early last year.
The offer raises the question of which company could be next to receive a bid in the consolidating car dealer space. Motorpoint (MOTR) shares are trading at a record low - its market cap has fallen from £350mn in 2021 to under £100mn - which could entice an offer. CA
