Next (NXT) shares enjoyed a 9 per cent rally on the release of a half-year trading update, which beat many analysts’ expectations. The group reported a 0.7 per cent rise in full price sales during the second quarter - something it’s been struggling to do of late. However, full price sales for the year to date are still down 1.2 per cent as a whole. Much of the second-quarter improvement was to be found in the group’s directory business, which grew sales by 11.4 per cent in the latter period. Retail sales, by comparison, fell 7.4 per cent, suggesting that Next is still struggling to drive customers into stores. Breaking the performance down month by month, June marked a real turnaround for Next, implying that warmer weather also lent a helping hand. Year-on-year full-price sales moved from a 3 per cent decline in May to 3 per cent growth the month after.
Weather is a crucial factor, but the group has also been working to improve product ranges, the online functionality and restrict how many products are sold at markdown prices. Next entered the summer sale with 5 per cent less stock and markdown sales fell by 14 per cent. Overall, accounting for idiosyncratic movements in each division, underlying total sales (which were also adjusted for a delay in the timing of directory end-of-season sale despatches) were down 2.3 per cent at the half way stage.
Management has said it expects the full-price sales performance continuing into the second half at the same rate of 1.2 per cent decline. Based on Shore Capital forecasts, analysts there estimate full price sales for the full year to fall by 1 per cent, which would equate to a 1.1 per cent total sales decline.
Finally, the group confirmed a third 45p special dividend, to be paid on 1 November 2017, in line with the new policy outlined in January. This follows an initial payment made on 2 May 2017 and the second payout on 1 August 2017.
