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Birmingham Post
Birmingham Post
Business
Tom Pegden

Next issues surprise trading update – and it’s not bad news

Next, the high street fashion giant, has put out an unscheduled trading update following better than expected sales. The Leicestershire-based retailer said sales over the last few weeks had been much better than it had anticipated – partly thanks to the heatwave bringing shoppers out for summer clothes, and partly thanks to people getting pay rises.

Shares jumped 5 per cent on the announcement to £67.40, after the business said it expected sales of £4.67 billion for the year – up £137 million on its previous guidance – and raised its full year profit guidance by £40 million to £835 million.

Sales for the last seven weeks were up more than 9 per cent on the same period last year – after stating in May that it had expected sales would be down 5 per cent year-on-year.

The business said it now expected sales for its full financial year to be 1.4 per cent up – after previously thinking they would be 1.5 cent down.

In a surprise statement the business said: “We believe the reasons for the over-performance are as follows: One, the change in weather. The onset of warmer weather has made a significant difference to our performance, particularly coming after a wet and cold April.

“Two, in an inflationary environment, annual salary increases deliver a significant uplift in real household income at the time they are awarded.

“For example, during April annual inflation was running at 8.7 per cent and monthly inflation was 1.2 per cent – if an individual received a pay rise of 5 per cent, then their real income would have risen by 3.8 per cent in that month.

“We do not think it is a coincidence that sales stepped forward so markedly at a time of year when many organisations make their annual pay awards.”

However it tempered the positive news, by stating: “If recent pay rises and the sudden change in weather have indeed contributed to the current over-performance, then it is reasonable to expect that the effect will diminish over time because ongoing inflation will slowly erode the positive effect of annual pay increases.

“This is why we are not anticipating the current performance to continue at the same level going forward, albeit we have moderately improved our guidance for the rest of the year.”

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