Next surprises market with increased profits

The retailer Next said early on Tuesday that sales have risen between two and three per cent recently, thanks in large part to the good summer weather. As a result it raised its profit forecasts by £15m for the first half of the financial year and said of its clothing range that "we have been much happier with the design and fashion content of our ranges across all product areas."

The group brought forward its trading update by a week to make the announcement, as sales in the first half climbed by 1.4 per cent, leaving the summer sale, which started on Saturday, with less discounted stock than usual. As a result of the better news the retailer raised its earnings estimates by £15m for both the first and second half, leaving it £30m ahead for the year. City analysts are expected to upgrade their targets to £400m for the financial year to next January.

In spite of the good news Next's management was not wholly positive on the outlook. Simon Wolfson, the company's chief executive expressed caution over the downturn and the possible effects of swine flu on consumer spending habits. The company is still looking at an annual drop in like-for-like sales of between 3.5 per cent and 6.5 per cent.

Next shares closed at 1,644 pence on Monday, 70 per cent higher than they were a year ago, and moved up in early trading on Tuesday.

WHAT THEY ARE SAYING:

Nick Bubb, retail analyst at Pali International, in the Guardian: "The green shoots are alive and well and it will take a hurricane in the autumn to blow them over."

Management Today: "With Next, a real high street laggard in recent years... raising its full-year earnings forecast by £30m, it's clear that things are looking up on the high street. It's amazing what a bit of sunshine will do. But will it last?"  ·