Next 'cautious' but pleased with progress

16th Sep 2009 07:02

Fashion retailer Next enjoyed better than expected progress in the first half, but kept its 'conservative' forecasts for second half like for like sales unchanged.Pre-tax profit for the six months to July rose 7% to £185.5m, in line with analysts' forecasts, on revenue up a touch to £1.51bn from £1.5bn in 2008.Like for like sales at the Retail business fell 1.2%, ahead of the firm's initial expectations, while total sales, which includes new stores, were up 0.8%. Retail profit increased by 4.4%.Next said even if the economy technically comes out of recession it can see no reason for the consumer outlook to significantly change through the rest of this year. As such, it remains 'cautious' for the second half.'We are conservatively planning for Retail like-for-like sales to be in the range -3.5% to -6.5% and Directory sales to be 0% to +2%,' it said.But forecasts for full year net operating margins were upgraded. Margins on the Retail side are now expected to be 'modestly below' last year's 13.1% and there's expected to be a 'slight' increase on last year's 19.3% at Directory.Full year profit is predicted to be close to last year's £429m, that's more than the £400m previously predicted. But the upgrade assumes sales are within the budgeted ranges, and is very much dependent on its sales performance in the critical final quarter.With 'very strong' cash flow and dividend cover approaching three times, bosses decided to raise the interim dividend by 1p, or 5.6%, to 19p a share.Broker Charles Stanley lifted its 2009/10 profit forecast to £429m, in-line with guidance, and predicts £450m for 2010/11.'Next has proven to be amongst the most resilient general retailers in the current downturn, and we expect it to remain so,' it said, maintaining its 'accumulate' recommendation.