Investing.com -- Next Plc shares rose as the UK retailer announced an unexpectedly strong third-quarter performance, prompting a full-year profit forecast increase.
At 5:58 am (09:58 GMT), Next was trading 1.4% higher at £10,212.5.
"We believe the strong performance was driven by the early arrival of colder weather this year, versus an unusually warm September and early October last year," the company said in an exhange filing on Wednesday.
Next outperformed expectations with a 7.6% rise in full-price sales which was driven by a 20% growth in its online international sales, a sector analysts at RBC (TSX:RY) Capital Markets had already expected as a high-growth area for Next.
“We see a positive read across to other retail names broadly but MKS and ABF in particular given the strong UK update from NXT,” said analysts from UBS in a note.
The retailer also reported a 3% year-over-year increase in UK retail sales, suggesting resilience in the face of uncertain consumer sentiment.
Analysts from RBC noted this result as a promising indicator for the broader UK retail sector, where Next’s strong positioning with omnichannel offerings could signal similar opportunities for other retailers such as Marks & Spencer (OTC:MAKSY) and Associated British Foods (OTC:ASBFY).
As per RBC, Next’s ability to adjust its strategy and effectively capture online demand has set a positive trajectory for the rest of the fiscal year.
Following the third-quarter results, Next revised its full-year profit guidance upward, estimating pre-tax profits at £1.005 billion, up from an earlier forecast of £995 million.
RBC analysts, however, remain slightly more optimistic, projecting full-year pre-tax earnings closer to £1.022 billion, bolstered by Next’s seasonal strategies and online growth.
Despite concerns over potential demand shifts that could reduce fourth-quarter performance, RBC noted a positive outlook, especially if December’s cooler weather brings additional demand in seasonal retail categories.
Analysts at RBC praised Next’s operational efficiency and its “well-developed customer base,” which has allowed the retailer to maintain strong sales even amidst a slower UK economy.
RBC maintains a price target of GBp 10,500 for Next’s shares, reflecting confidence in the retailer's continued growth potential, particularly in its UK and online international segments.
“We estimate Total Online inc. Overseas at +10.9%, meaningfully ahead of H2 guidance (+6.2%),” said analysts at UBS.