What to look out for in Next’s quarterly results after the washout weather for fashion retailers

Next has been nothing short of a retail powerhouse over the years under the successful leadership of Lord Simon Wolfson and the fashion retailer’s omnichannel excellence continues to grow.

Having recently posted consecutive profit upgrades and storming sales, all eyes are on Next to live up to the high expectations it has set for itself.

Earlier this year, Next laid out three new avenues of growth for the business: overseas ambitions, new additions and a boost to its Total Platform growth.

Since then, it has certainly delivered, striking a deal with Myntra in India, being rumoured to have eyes on an acquisition of Ted Baker and partnering with AllSaints on its debut childrenswear collection.

So, how did Next perform during the second quarter – the sixth wettest spring on record? No doubt it has been a pretty dismal few months in terms of UK weather, but how detrimental has the unseasonable weather been to Next as well as the rest of the retail market?

“Next’s upcoming update will be a really important one – not just for the business itself but for the whole UK apparel and home scene”

Next posted a 5.7% increase in total sales for the first quarter to April 27, 2024, while online sales were also up 8.8% and retail sales remained flat.

At the time, the retail giant warned that sales in the second quarter were expected to be “weaker” then the first, dropping by an estimated 0.3% due to the surprise rewards of the mini heatwave of the previous year.

Considering the dismal UK weather in the weeks and months since, the tough comparatives are likely to hit harder than ever.

As the first of the fashion retailers to officially update on trading throughout the spring and early summer, Shore Capital director Clive Black says that Next’s upcoming update will be a really important one – not just for the business itself but for the whole UK apparel and home scene.

“For much of the second quarter, trading was poor year on year and it’s really important to say that the trading from April/May through to now has been against what were really tough comparisons in May and June last year,” says Black.

“May and June 2023 were glorious weather-wise and for most of the apparel retailers it was perfect timing.”

With the likes of T-shirts, sandals and swimwear flying off the shelves this time last year, there wasn’t much product going into the seasonal sale and profitability across the sector remained strong. This year, however, it’s a different story.

With an early Easter, a dull and grey May and a washout June, the whole trading period is likely to have been impacted. The City and competitors alike will be looking closely to see how resilient Next has managed to be despite the struggles.

“I expect Next UK retail sales will be pretty mellow. They would do well to be flat and if they’re positive it would be an outstanding achievement year on year”

Clive Black, Shore Capital

Black adds: “For summer apparel, most people and particularly women will have already bought the clothing they want for their holiday and won’t be buying clothes for August.

“What Next says about trading in clothing over the past few months or so is going to be really important. I would have thought their UK retail sales would be pretty mellow. They would do well to be flat and if they are positive it would be an outstanding achievement year on year.”

With Next’s summer sale underway, including reductions across womenswear, menswear, childrenswear and home, along with many of its rivals who are heavily discounting their leftover summer stock, it wouldn’t come as a surprise for Next to report a tough quarter, holding more stock than they’d like at this point in the season.

However, Peel Hunt’s John Stevenson remains optimistic for the rest of the year: “This may well leave Next tracking slightly behind its second-quarter guidance,” he says. “Albeit we expect no material changes to the overall profit outlook.”