Next Profit Beats Estimates as Buying Teams Exceed Margin Goals

LONDON, United Kingdom — Next Plc reported first-half profit that beat analysts' estimates as the retailers' buyers achieved lower garment costs than expected, helped by the strong pound.

Pretax profit advanced 7.1 percent to 347 million pounds ($533 million) in the six months through July, the company said in a statement Thursday. Analysts surveyed by Bloomberg expected 340 million pounds. Retail profit margins widened to 14.9 percent from 14.1 percent in the year-ago period, helped by the stronger pound.

“It is surprising that retail margins moved forward,” Chief Executive Officer Simon Wolfson said in the statement. “The main reason for the margin improvement is that our buying teams over- achieved against their target margin, assisted by better currency rates.”

The British retail sector is under pressure to attract and retain customers. Despite a recovering economy, only 47 pence of every extra pound in the pockets of U.K. consumers is going through the tills of retailers, with an increasing amount being spent on leisure activities and holidays, Exane BNP Paribas said in a research note last week. Comparable-store sales dropped 4.3 percent last month, according to business advisory firm BDO.

Next has outpaced a sluggish U.K. fashion industry and confirmed its full-year pretax profit forecast, which it raised in July to a range from 805 million pounds to 845 million pounds. It also said it will boost employee pay in October in response to the U.K.’s National Living Wage.

By Thomas Buckley; editors: Matthew Boyle, Thomas Mulier.