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Next Surges as E-Commerce Sales Boost Fuels Guidance Upgrade

Next Plc shares surged after the company raised its financial guidance, helped by e-commerce investments that are keeping the U.K. retail bellwether ahead of troubled rivals.

The apparel chain’s warehouse and distribution upgrades are boosting online sales, which rose 12 percent in the latest quarter, even as British department stores and other fashion chains sink deeper into trouble. The shares rose as much as 8.4 percent early Wednesday in London, the most in about 11 months.

The company said sales at regular prices were particularly strong in July, meaning it had to do less discounting. Next plans fewer markdowns in the second half as well.

Next continues to be a bright spot in the weak U.K. retail sector, as Topshop owner Arcadia Group Ltd. shuts stores and Brexit uncertainty hits consumer confidence. While other retailers decried a soggy spring and tough comparisons after the soccer World Cup and a royal wedding boosted sales a year earlier, Next had no complaints.

“We overestimated the beneficial impact of the weather last year and have focused on improving our stock availability in stores in the first and second quarter, which may have helped sales,” Chief Executive Officer Simon Wolfson said by phone.

Next now expects sales at originally marked prices to increase by 3.6 percent for the year, more than double the previously expected rate. By that measure, second-quarter sales rose by 4 percent, well above analyst estimates.

Amazon effect

The report marks a sharp improvement from earlier this year, when the company warned that its first-quarter strength was unlikely to extend through the year.

The retailer partnered with Inc. at the beginning of the quarter to install click-and-collect counters in more than 500 Next outlets, for customers to pick-up parcels bought via the U.S. e-commerce giant.

Wolfson said the deal is driving around 1,000 extra customers to stores per week overall, a number he called “tiny” for now.

“It may build to be a bigger service but the numbers are so small at the moment that it’s definitely not having an impact on sales,” he said.

(Updates with CEO comments on Amazon in last three paragraphs.)
Reporting by Ellen Milligan.