Potential Negative Effects of Tax Increases on Sales Warning Issued
Next, the renowned high street retailer, has raised its full-year profit forecast following a stronger-than-anticipated sales performance. In the 13 weeks up to April 26, they recorded a 11.4% increase in total full-priced sales year-on-year, amounting to an impressive £55m gain.
This sales surge, triggered by the early purchase of summer clothing due to the favorable spring weather, was announced to the financial markets this morning. Online sales, accounting for approximately one-third of Next's total sales, showed a growth of 8.9% in the UK and 29.6% internationally.
In the UK, retail sales increased by 5.2% in the first quarter, resulting in an overall growth of 7.3%. Consequently, Next has now increased its pre-tax profit forecast for the entire year by £14m, setting it at £1.08bn.
However, Next maintained its sales guidance unchanged. The sales spike in Q1 was tagged as an "overperformance," with sales shifted from the second quarter rather than indicative of a long-term surge in demand. The firm expressed caution about sales in the latter part of the year due to the impending effects of April's National Insurance increases on the wider economy.
With these increases, retail employment is expected to decline, and businesses will be confronted with higher costs, which could lead to increased prices. Recent data shows that the recovery in consumer confidence stalled in April, as inflation, economic uncertainty, and geopolitical tensions offset wage growth.
The British Retail Consortium's CEO, Helen Dickinson, foresees that economic uncertainty will complicate businesses' efforts to pass on higher wages and costs to customers. Next anticipates full-price sales to rise by 6% in the full 2024/25 financial year, following a 12.2% increase last year. The company expects sales growth to fall to 3.5% in the second half of the year after experiencing a growth of 8.8% in the first half.
- The FTSE market was warned about potential declines in retail employment due to the upcoming National Insurance increases, which could lead to higher costs for businesses and potentially increased prices.
- In light of the economic uncertainty, the British Retail Consortium's CEO, Helen Dickinson, expressed concerns about businesses' ability to pass on higher wages and costs to customers.
- Despite the strong sales performance in Q1, Next maintained its sales guidance unchanged, expressing caution about sales in the latter part of the year due to the impending effects of April's National Insurance increases on the economy.
- Next anticipates full-price sales to rise by 6% in the full 2024/25 financial year, following a 12.2% increase last year, but expects sales growth to fall to 3.5% in the second half of the year.
- The weather played a part in the sales surge at Next, as the favorable spring weather prompted an early purchase of summer clothing, leading to a 11.4% increase in total full-priced sales year-on-year, amounting to an impressive £55m gain.
