Next expects annual profits of close to £1bn – here’s why the high street retailer is on the rise…

Next has raised its full-year profit forecasts after the retailer’s first-half sales beat expectations, boosted by a surge in online demand overseas.

The FTSE 100-listed high street giant saw its full-price sales rise 4.4 per cent in the first half of the year, beating expectations of 2.5 per cent, after securing £42m more revenue than expected in the second quarter.

Next told investors it had planned for a 0.3 percent decline in full-price sales in the second quarter, due to “exceptionally favourable” trading conditions last summer.

However, overall full-price sales in the UK barely registered 0.4 per cent growth, despite comparatively poor weather over the three-month period, while overseas online sales soared 21.9 per cent, “much better than expected”.

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

Next actions rose 8.5 percent in early trading to 9,844 pence, taking gains over the past 12 months to more than 40 percent.

Group sales rose 8 per cent in the first half, reflecting the £115m acquisition of FatFace and an increase in Next’s stake in Reiss late last year.

Next expects full-price sales growth of 2.5 percent in the second half.

He said: ‘This might seem cautious compared to the performance in the first half.

“However, compared to two years ago, growth in the first half and forecasts for the second half are almost identical.”

Victoria Scholar, chief investment officer at Interactive Investor, said: ‘The tough economic environment with cost of living pressures and high interest rates has created a two-speed retail environment, separating winners from losers.

‘True to form, Next has managed to position itself in the top category thanks to its attractive price point, impressive reach and engaging online presence that has allowed the company to reach a much larger potential customer base abroad.

‘It has also made some profitable acquisitions in recent years, snapping up struggling UK retail brands that have helped expand its offering.’

Clive Black, director at Shore Capital, said Next’s performance could be seen as “a direct commentary on the UK apparel trade through what has been a fairly challenging market, particularly in the spring against tough comps”.

The analyst added: “So, beating its own sales expectations by 3.5 percent, delivering positive year-on-year sales and thereby increasing its FY25 PBT guidance by £20m, is a very pleasant surprise for us and a wonderful achievement.

‘Next shares are rated fairly fully, but with these reports, the sector premium for its stock is justified and the stock has the basis for further improvement. Excellent rating.’