LONDON: Britain's No. 2 fashion retailer Next raised its guidance after first-quarter sales beat expectations, boosted by exceptionally warm weather over Easter and spending ahead of the Royal Wedding holiday weekend.
Next, which runs over 520 stores in Britain and Ireland as well as the Directory home shopping business, said on Wednesday total sales rose 5.2 percent over the 13 weeks to April 30, its fiscal first quarter.
That compared with company guidance for first-half sales in a range of down 0.5 percent to up 2.5 percent.
Next estimated at least 2.5 percent of the overperformance came as a result of hot Easter weather and spending in anticipation of the four-day Royal Wedding holiday weekend.
The company raised its guidance for first-half sales to growth of 1.5-4.0 percent, adding gross margins and costs remained well controlled and in line with internal budgets.
Next said it remained cautious on the outlook for 2011 as there had not been a significant change in the underlying economic environment.
It has forecast full year sales growth of 1-4 percent, which would give pre-tax profit of 535-585 million pounds ($881-$963 million).
Next shares, which had risen 11 percent over the past month, were up 4 percent at 2,311.5 pence at 0706 GMT, valuing the business at 3.9 billion pounds.
"Today's first quarter update is surprising good," said Arden Partners analyst Nick Bubb, who noted the read-across for rival Marks & Spencer was positive.
A raft of British retailers have issued profit warnings over the past month as the economic outlook has darkened, with consumers worried about government job and welfare cuts, inflation, muted wage growth, a stagnant housing market and the prospect of higher interest rates.
Retail sales were better than expected in April, a survey by the CBI business lobby found on Tuesday.
However, the survey said retailers expected sales in May to be their worst since September 2009, once the time of year was taken into account.
Retailers have also been facing significantly higher input costs, such as rising commodity prices, especially cotton, and wage rate inflation in the Far East.
Unlike rivals such as Primark and Hennes & Mauritz, but in common with companies such as Debenhams and Marks & Spencer, Next has been passing on the higher input costs to customers, with average selling prices up about 6 percent.
Last month, Primark said it would take a hit to profit margins to maintain price leadership in clothing, while in March H&M missed first-quarter profit and sales forecasts.
Next said it expected price rises of about 8 percent in its second half.
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