Next Raises Sales

British clothing chain Next (NXT.L) raised its revenue and sales forecast for its full fiscal year on Thursday, citing a “less challenging outlook” even as its six-month pre-tax profit declined.

Profit before tax, management’s preferred profit measure, dropped to 309.4 million pounds ($408.6 million) in the six months through July from 342.1 million pounds a year earlier, the company said in a trading statement. Earnings per share fell to 176.9 pence from 188.6 pence in the corresponding half of the previous year.

Next said that the slump in profit was caused by the retail store business where profit fell 33.1% to 89.5 million pounds as a result of falling sales, a large fixed cost base, and higher markdown costs. Its directory business, which includes online sales, flourished, with a 6.3% increase in operating profit to 217.1 million pounds.

Group sales fell 2.2% to 1.91 billion pounds, with an 8.3% decline in the retail business and a 5.7% increase in the directory division. The company signaled that its fortunes might be about to change as it raised its profit and revenue forecasts for the full fiscal year that runs through January 2018.

“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,” the company said in its statement.

It lifted both ends of its target range for profit before tax by 7 million pounds to between 687 million pounds and 747 million pounds. This would still represent a decline in that profit measure of between 13.1% and 5.5% from a year earlier. Next, expects full-year sales to fall by 2% in the worst case and rise by 1.5% under its best case scenario, from a previous range of between a drop of 3% and an increase of 0.5%.

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