Next expects annual profits to hit almost £1bn – here’s why the retailer is growing so fast…

Next has raised its full-year profit forecast after the retailer’s first-half revenue beat expectations, driven by increased online demand abroad.

The FTSE 100-listed giant saw full-price sales rise 4.4 percent in the first half of the year, beating forecasts of 2.5 percent. Second-quarter sales were £42 million higher than expected.

Next told investors it expected a 0.3 percent decline in full-price sales in the second quarter due to “exceptionally favourable” trading conditions over the summer.

However, total full-price sales in the UK grew by 0.4 per cent despite relatively poor weather over the three-month period, while online sales abroad rose by a “much better than expected” 21.9 per cent.

As a result, Next raised its full-year pre-tax profit forecast by £20m to £980m, representing £11m of additional revenue and £9m of logistics cost savings.

Next shares rose 8.5 percent in early trading to 9,844p, taking its gain over the past 12 months to more than 40 percent.

Group revenue rose 8 percent in the first half of the year, driven by the £115 million acquisition of FatFace and an increase in Next’s stake in Reiss late last year.

Next expects full-price sales to grow 2.5 percent in the second half of the year.

It said: ‘This may seem cautious compared to the first half performance.

“But compared to two years ago, growth in the first half of the year and the forecast for the second half are virtually identical.”

Victoria Scholar, head of investments at Interactive Investor, said: ‘The difficult economic conditions with pressure on the cost of living and high interest rates have created a two-speed retail environment, separating winners from losers.

‘Next, in keeping with tradition, has managed to enter the first category thanks to its attractive price, impressive reach and attractive online presence. This has allowed the company to reach a much larger potential customer base abroad.

‘The company has also made a number of profitable acquisitions in recent years, such as buying up struggling British retail brands, which has allowed the company to broaden its offering.’

According to Clive Black, director at Shore Capital, Next’s performance can be seen as “a direct commentary on the UK clothing sector in a market that has been quite challenging, particularly in the spring, given the difficult comparative figures”.

The analyst added: ‘It is a very pleasant surprise and a great achievement for us that the company has exceeded its own revenue guidance by 3.5 per cent, delivered positive year-on-year sales and in doing so raised the PBT guidance for FY2025 by £20m.

‘Next shares are fairly full-rated, but with reports like these, the equity premium in the sector is justified, and the shares have the basis to perform even better. Top marks.’