Next upbeat on outlook after 'encouraging' performance

Retail chain Next has delivered a "modest" upgrade to its full-year outlook after an "encouraging" performance amid tough high street conditions.

The fashion group posted a 9.5% fall in pre-tax profits to £309.4 million for the six months to the end of July after total sales across its high street stores, including markdowns, fell by 8.3%.

But chief executive Lord Wolfson said while it was a challenging first half, improved trading in the second quarter suggested efforts to overhaul its ranges were beginning to pay off.

He said: "The first half of the year has been difficult and sales and profits are in line with our cautious expectations.

"However, our performance in the last three months has been encouraging on a number of fronts and whilst the retail environment remains tough, our prospects going forward appear somewhat less challenging than they did six months ago."

Next is forecasting full-year profits of around £717 million, up from £710 million previously, although this would still mark a drop on the year before.

It said sales could fall by up to 2% or rise by 1.5% over the year, having previously warned of a fall of up to 3%.

The group also confirmed that the worst of the price rises were over as a result of the Brexit-hit pound, which has sent its overseas buying costs soaring.

Next put up prices by 4% on average for its spring and summer season this year, but is pencilling in a rise of 2% for next spring and summer, with prices remaining flat at the end of 2018.

The group said: "Next year price inflation looks set to work its way out of the system as the effects of the one-off Brexit devaluation of the pound begins to annualise."