Fashion bellwether Next’s second-quarter update reminds bosses that despite external challenges there are opportunities for good retailers.

Fashion bellwether Next’s second-quarter update this week will have reminded retail bosses of a few things.

First, Next’s enviable mix of market-leading fulfilment and bang-on product mix means it is capable again and again of outpacing ambitious growth forecasts (despite a wobbly May).

Second, weather can make or break a quarter’s trading. Next reported that the cool weather in May hit demand, resulting in weekly sales falls as deep as 3%, while it was the warm conditions in June and July that enabled it to surpass expectations for the quarter and raise its profit guidance.

Third, consumer demand remains volatile.

Next may have attributed the peaks and troughs in its second quarter to the changeable weather, but with sales oscillating to such a degree (from -3% to +5%), it seems there are underlying issues at play, on top of an unseasonable climate, namely unpredictable consumer demand.

Retailers shoud ‘take heart’

It is testament to Next though that, despite the less than perfect weather and the shaky shopper sentiment, it ended up beating expectations and has upped the mid-point of its full-year profit guidance by 1.9% from £810m to £825m.

Peel Hunt analyst Jonathan Pritchard believes Next’s update reflects a strong retail market for June and July, and that other retailers should take heart.

“We continue to believe that given the right conditions and the right offer the consumer will spend, be that on smaller or larger ticket items,” said Pritchard. “We think that the value-seeking habits picked up during the recession [will] persist, so pricing and quality has to be spot on, but the opportunity is there for good retailers to do well.”