Market report

Next bucks shopping slide | Rolls-Royce | Pets At Home

Next bucks shopping slide

Next

Next has raised its full year profits guidance by £10m to £845m after an improvement in trading.

Full price sales in the second quarter (May-July) were up +6.9% on last year.

Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, commented: Despite this excellent first half performance, Next remains cautious and is expecting sales to be broadly flat in the second half, a material slowdown.

“This probably reflects a degree of conservatism from the group. It also likely reflects the recent rapid increase in interest rates which could be set to bite harder in the second half, sapping consumer confidence.

“So far, 2023 has not been anywhere near as bad as expected for the UK consumer, and this has benefitted Next and its peers. The big question is – how much longer can this last? Recent signs that inflation is moderating offers hope for the economy, but the longer interest rates stay above 5% the greater the likely squeeze on disposable incomes.” 

The upgrade contrasted with figures showing shoppers curbed their spending last month amid rising interest rates, rain and rail strikes as the Bank of England prepares to raise borrowing costs for a 14th consecutive meeting today.

Retail footfall fell 1.7% between June and July for the first time since 2009, when MRI Springboard first started compiling the figures.

The BoE is expected to hike rates by another 25 basis points to 5.25%, a more modest increase than the larger 50bps raise at its last meeting.

Since then, there have been some more encouraging figures on inflation which “should take the pressure off the BoE to deliver another bumper rate increase at this month’s meeting,” according to Matthew Ryan at Ebury.


Rolls-Royce

Rolls-Royce

Engineering group Rolls-Royce posted a fivefold rise in underlying operating profits to £673 million for the six months ending on 30 June (2021: £125m) on a 31% jump in underlying revenues to £6.95bn.

“There is much more to do to deliver better performance and to transform Rolls-Royce into a high performing, competitive, resilient, and growing business,” said chief executive Turfan Erginbilgic.

“We will share the outcome of our strategy review along with medium-term goals for the Group in November.

“We have a strong portfolio of products and technologies in growing end markets and have secured key contract wins that will create future value and profitable growth. Our continued transformation will grow our business and allow us to play a stronger role in the energy transition.”


Pets At Home

Pet food and accessories company Pets At Home said it was making no change to guidance for FY24 and remains comfortable with current analyst expectations for group underlying PBT.

Lyssa McGowan, chief executive, said: Our performance in the first quarter has been encouraging. The quality of our growth has remained strong as we grew transaction volumes and continued to acquire new consumers at an impressive rate, as our compelling value, range and service continues to resonate with consumers.

“It has also been a quarter of steady delivery against our strategic plan we set out in May. We have expanded and enhanced our physical estate, made good progress in the development of our digital platform, and continued the transition to our new distribution facility, as we execute on our ambition to build the world’s best pet care platform.”



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