Next upgrades profit outlook again as it benefits from summer spending

Next has raised hopes that UK shoppers are still willing to spend despite pressures on household budgets, as it upgraded its profit guidance for the third time this year.The clothing and homeware retailer said it benefited from sunny weather and the release of some “pent-up demand” in the Middle East and Northern Europe in the 13 weeks ended on 1 August.Next, which owns the UK rights to the US brands Gap and Victoria’s Secret as well as stakes in a plethora of labels including Reiss and Joules, said its full-price sales rose by 9% in the second quarter compared with the same period last year, more than double its initial estimate of a 4% rise.The FTSE 100 company, which has more than 500 stores across the country, has a long history of pushing expectations higher and then beating them.This pattern has helped push its share price up by more than 20% in the past year alone.The retailer, which is led by the chief executive, Simon Wolfson, now expects to end the year with a pre-tax profit of £1.2bn, about £25m higher than previously expected and a potential 7.3% rise against last year.Its shares jumped by almost 7% to a fresh record high on Wednesday morning, making it the best performer across the FTSE 100.Garry White, the chief investment commentator at the wealth manager Raymond James, said Next’s update showed it could “outperform despite a challenging backdrop for consumer spending”.He added: “If there is one lesson investors have learned from Next over the years, it is that management has a habit of under-promising and over-delivering, making guidance upgrades feel less like surprises and more a feature of the investment case.”It comes as other retailers report that they are grappling with a difficult trading environment, with many warning of inflation and falling consumer confidence as a result of the Iran war.Last month the boss of John Lewis told employees that its profits were being squeezed by “really tough” trading conditions, according to the Financial Times.skip past newsletter promotionafter newsletter promotionJason Tarry, the chair of the John Lewis Partnership, said in an interview with the company’s internal magazine, seen by the FT, that the department store chain was dealing with an environment where it “will trade into lower sales and higher costs”.He added: “We have to adjust for an immediate future that we weren’t expecting even six months ago, let alone a couple of years ago.“It is difficult when things are tough from a sales perspective, but we’re holding our nerve around our focus on margin improvement and firm stock control, rather than just trying to chase top-line sales.”