(Closes share price in fifth paragraph.)
Nov. 2 (Bloomberg) -- Next Plc, the U.K.’s second-largest clothing retailer, reported faster sales growth in the third quarter as the expansion of the Next Directory home-shopping unit outweighed worsening sales at the company’s stores.
The shares rose to a record after Next said total brand sales rose 3.3 percent, excluding value-added tax, more than the first half’s 3.2 percent gain and beating the 1.4 percent median estimate of three analysts. Directory revenue increased 17 percent after a 15 percent gain in the first half.
Sales were “better than most had feared, with a knock-out performance from Directory making up for an expected weaker retail performance,” Kate Calvert, an analyst at Seymour Pierce in London, said in a note. She has a “buy” recommendation.
A television campaign advertising next-day delivery boosted sales at Next Directory, which is benefiting from a shift by customers toward online shopping. Next also added fashion items like a Geri Halliwell lingerie range to keep sales growing and spur shoppers’ interest at a time when many are cutting back. U.K. consumer confidence fell to its lowest in more than 2-1/2 years this month, according to GfK NOP Ltd.
Next shares rose 6.5 percent to 2,723 pence, the steepest gain since Sept. 15. They have advanced 38 percent this year.
No Price Increase
The retailer said early indications suggest that selling prices, which surged 8 percent this year because of higher cotton costs, won’t increase again next year.
Retail sales fell 3.3 percent in the quarter, worse than the first half’s 1.8 percent decline. Business was affected by warmer temperatures, which delayed purchases of winter garments.
“There is no question that very warm weather has affected seasonal sales, but there does seem to be a slight weakening generally in the consumer as well,” Chief Executive Officer Simon Wolfson said in a telephone interview.
The retailer narrowed its guidance for full-year pretax profit to 550 million pounds ($881 million) to 585 million pounds. That compares with an earlier forecast of 545 million pounds to 590 million pounds.
“There is not any reason for a dramatic change in the consumer environment, we will see the rest of this year continuing in much of the same way it has proceeded so far,” Wolfson said.
Lipsy, its younger fashion line, has struggled, he said. “The market that’s been hit hardest is the younger market.”
--Editors: Paul Jarvis, Celeste Perri.
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