Next ups profit forecasts again as CEO hails the return of the suit

Formal wear is back in fashion  (PA Archive)
Formal wear is back in fashion (PA Archive)

High street fashion king Next raised profit forecasts again today thanks to strong consumer demand, falling costs and higher wages

Chief executive Simon Wolfson also noted the return of demand for traditional “smart” suits, as people head back to offices and the trend for smart casual clothes fades.

Next, which also owns Reiss, said full year profits should be £875 million, up from £845 million previously forecast. That’s just the latest upgrade from a company with a history of doing better than its own often pessimistic sounding forecasts.

Wolfson, the longest serving FTSE 100 chief, told the Standard: “Cost inflation is easing across the board. Everything is moving backwards with the exception of oil. We are much more comfortable than we were.”

That’s good news for both the wider high street and the Conservative Party as it heads nearer a general election.

Wolfson said there is “one important note of caution – the  softening of the employment market. But we are much happier than we were six months ago, a year ago seems like a different world”.

He added: “Economic performance is much better than anyone expected.”

Next first noticed a swing back to more formal dressing for both work and social events 18 months ago. That trend has continued.

“It is just fashion”, said Wolfson. “You get these cycles. Smarter dressing is back in vogue.”

In the six months to July sales rose 5.4%. Half year profit rose 4.8% to £420 million. Next’s strategy is likely to include further deals, the success of the Reiss purchase a guide to future plans.

The idea is that Next gives new life to high street brands, by taking back office functions in house, while leaving management separate.

Next says consumer tastes are moving faster than ever. The statement said: “Fashion has always been about newness, but it appears to us that trends are moving faster; customers are willing to adopt new looks more rapidly than they have been for some time (even in areas that have moved more slowly in the past, like Homeware). Gone are the days when ‘moving on’ last year’s best seller would underpin the success of this year’s range. In almost every product category, this year’s best seller will be completely new.”

Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, said:

“Next has pulled another rabbit out of the hat today, leading to a further upgrade to its full year sales and profit guidance. UK consumer spending appears to have defied gravity. A strong employment market and rising wages have helped cushion inflationary cost pressures, meaning consumers have continued to spend, despite the gloomy economic headlines. Next has capitalised by doing the simple things well. Once again its operational execution continues to outshine almost all of its competitors.”

Next shares rose 134p to 7240p. It is valued on the stock market are about £9.2 billion.