Next weathers the storm, but doesn't expect consumer spending to lift

Better than expected results from Next boosted shares in the firm after it revealed it had reversed the decline in sales in the first quarter.

The fashion retailer said it had grown total sales by 0.2% in the second quarter, driven primarily by a surge in directory sales which climbed 5.6%.

The group said it had anticipated a tough season and managed stock accordingly, in order to cut down on the volume of items put on sale.

It said: 'Stock going into the end of season sale was significantly down on last year.'

The results were in line with guidance the business gave earlier in the year, and it noted that the difference in sales between quarter one and quarter two was due to 'unusual weather patterns' experienced in 2007.

In total sales were down 1.8% for the first half, while retail full price like-for-likes had declined by 6%, consistent with guidance previously given by the company.

However, full price like-for-likes in the second quarter, which declined 2.4% compared to last year, were an improvement on first quarter falls of 9.4%.

Looking forward, the group remained cautious about the outlook for the second half and said it could see no reason why consumer spending would improve, with economic risks on the downside and sales likely to be affected.

It said: 'We are currently planning for retail full price like for like sales in the second half to be down by a similar amount to that of the first half.'

Despite the outlook being difficult, analysts were reasonably upbeat about the results, noting that much of the downside has been priced in and that the company had come in at the top of expectations.

Landsbanki, reiterating its hold stance, said: 'The first half has come in at the top end of these (management's) expectations.

'We still believe that considerable forecast risks remain, particularly in 2009/10. However Next is already very modestly valued and this along with a conservative capital structure leaves us with a neutral stance.'

Shares in Next initially leapt 5.4% or 54p, to £10.59, in the wake of the results. By 09:12am, profit taking had reversed gains, with shares down 3p at £10.02.