Is Simon Wolfson the master of managing expectations?

The Next chief executive Simon Wolfson yesterday reported better than forecast first-quarter results but in his own inimitable way delivered a series of caveats about the outlook.

The late Easter, warmer weather and the weakness of the pound resulting in the trend for “staycations”, have all boosted first-quarter performance. But even the impact of swine flu has been factored in Wolfson’s sober forecasts for the second quarter.

After a like-for-like sales decline of just 2.3 per cent in the first quarter and the bolstering of profits forecasts by £15m, Wolfson forecast a first-half fall in like-for-like sales of between 4 and 7 per cent.

The City has rightly taken a more optimistic stance than Wolfson, with most plumping for the top end of forecasts.

To achieve only the middle of Wolfson’s range, Next’s second-quarter sales performance would have to drop 8 per cent on a like-for-like basis. Unless the weather deteriorates significantly – and forecasts indicate a warmer and drier summer than last year is on its way – and a swine flu pandemic severely impacts shopper spending, this seems unlikely.

The better results are also not just about a return to more favourable trading conditions but also a repositioning of the strategy of the company. If trading conditions worsen, this strategy should remain constant.

Improved fashion ranges and a sexy new TV ad campaign will also go some way towards ensuring Wolfson is again outperforming his own expectations in three months time.

However, Wolfson did show some positivity yesterday, telling reporters that the UK high street slump may have “bottomed out” before cautiously adding: “I wouldn’t want to characterise that by saying that we think the whole economy or high street has recovered, it’s just not as bad as we thought it was going to be.”

His sentiments reflect those expressed recently by Marks & Spencer executive chairman Sir Stuart Rose, who told the Institute of Directors that he has “seen stability return to the markets since Christmas”.

Rose said that he hoped that M&S, one of the first retailers impacted by the downturn, would be one of the first to emerge from the recession.

However, in the light of Next’s results, it seems that that may be some time in the future if M&S is losing trade to its middle-market rival.

Rose may well wish he had adopted the more cautious approach favoured by Wolfson.