Next cautious as demand 'cools'

4th Aug 2010 07:25

Next has noticed a 'cooling' in consumers' demand in recent months, but still expects profits this year to rise by between 6-11%, in line with its previous forecasts."There has been a noticeable cooling in retail demand in recent months, the mood amongst consumers is best characterised as cautious. We believe that consumer spending will be more restrained in the second half than in the first, as spending cuts and tax rises begin to take effect," the high street giant said.Underlining the growing inflation threat in the UK, Next also warned prices will rise by 5-8% next spring to offset the VAT rise to 20% and input cost rises, especially cotton.Sales rose by 3.1% in the half year to end July, with catalogue and online sales strong and a decline on the high street. Retail rose by 1.3% as online business growth offset a like-for-like fall of 1.5% from store sales. Directory sales jumped 7.8%. Overall, the figures were in the middle of Next's previous guidance. Good cost control will mean group operating profit for the first half will be in the region of 15% up on last year, it said.For the second half, Next is forecasting total sales will be between 0-3% but is taking a cautious stance on the shops business.Retail sales are forecast to fall by 1.5% to 4.5% like-for-like, due to the planned VAT hike and last winter's strong performance. Directory sales are tipped to grow by between 4-8%."Based on achieving our sales budgets in the second half, which are within the above guidance, we believe that group profit before tax will be in the range £535m to £560m. This would represent an increase over last year of 6% to 11% and is in line with current market expectations," Next said.The dividend this year will also rise by 10% with more share buybacks also possible.