Next raises sales forecast

Next has said its shoppers are in better financial shape than first feared

Fashion chain Next has said its shoppers are in better financial shape than first feared as it upped its sales forecasts for the rest of the year.

The high street climate has been "more benign" than anticipated in the three months to October 31, helped by "encouragingly low" inflation and interest rates, it said.

Shoppers are managing their credit carefully and fewer of its Next Directory customers are going into arrears, reflecting a "general improvement in consumer finances", Next added.

In September it pencilled in like-for-like sales high street declines of between 3.5% and 6.5%, but Next forecast a worst-case 3% slide and said sales could even hold steady against last year in the six months to the end of January.

Next was also helped in October by a smaller-than-expected rise in unemployment and easier sales comparisons against last year, when sales suffered in the wake of the Lehman Brothers collapse.

Like-for-like sales declined by a better-than-expected 1.3% during the period, the firm said.

Marks & Spencer also cheered investors with strong first-half profits, although conditions are set to get tougher on the high street next year when VAT rises back up to 17.5%, putting upward pressure on prices.

Next added that improved ranges - particularly in womenswear - and its early adoption of new trends had helped its performance, alongside a strong showing from the homeware ranges in the Directory business.

The catalogue and online arm grew sales by 5.1% during the third quarter - prompting Next to raise second-half guidance strongly for Directory from between 0% and 2% to a 4%-6% increase.

Shares in Next rose more than 4% as Seymour Pierce analyst Freddie George said the retailer's update was "significantly better than expected".