En vogue fashion retailer Next ups full year profit forecast as it extends lead over beleaguered rival M&S

By Natalie Wain

Updated: 05:27 EDT, 29 July 2014

Fashion retailer Next continued to extend its lead over rival Marks & Spencer today as it upped it's full year profit forecast for the second time in three months.

The UK's second largest fashion house said it expected profits to be £25million higher following strong sales in the first half of the year.

Shares in the group were up 2.5 per cent, or 165p, during early morning trading on the back of the announcement, prompted by sales that were 10.7 per cent ahead of target in the first half year to 26 July.

Here's looking at you, Next: The UK's second biggest fashion retailer continued to extend its lead over rival Marks & Spencer today as it upped it's full-year profit forecast, as it hits the right note with customers

The retailer said that sales were ahead of its 5.5 per cent to 9.5 per cent full year guidance and that it was raising that range to 7 per cent to 10 per cent.

The robust results defied data released by the Office for National Statistics last week suggesting that retail sales had suffered a setback in June.

Sales volumes rose just 0.1 per cent in June, below forecasts for a 0.3 per cent increase, according to ONS data, with consumers possibly distracted by the Fifa World Cup.

The ONS said the year-on-year rise of 3.6 per cent was down from 3.9 per cent in May - undershooting forecasts that it would remain unchanged.

Next said today that its revised guidance 'might appear overly cautious' but pointed out that the first half performance compared with a period last year when sales were hampered by a very cold spring and Easter weather.

It expects the final quarter of the year to be a 'challenging comparison' and guidance for the next six months was for sales growth of 4 per cent to 10 per cent.

Next's strong performance comes as beleaguered rival Marks & Spencer continues to flounder, with boss Marc Bolland under continued scrutiny after initiatives to kick-start the group's crucial fashion division failed to gain traction.

Top of the shops: Next's robust results defy data released by the Office for National Statistics last week suggesting that retail sales had suffered a setback in June, with many retailers possibly affected by the Fifa World Cup

Bolland put on a brave face at the company's AGM earlier this month as he attempted to reassure disgruntled shareholders after disappointing first quarter clothing sales.

The poor results prompted Bolland to announce that he and his senior directors and the firm’s 82,000 staff would not receive a bonus.

There was better news for Next shareholders, however, as the retailer continues to pass on its recent good fortune. A dividend is expected to paid out this week following special 50p dividends in February and May, although no more are anticipated for the remainder of the year.

Out of fashion: Struggling M&S boss Marc Bolland faced unimpressed shareholders at the group's AGM earlier this month as he tried to explain the retailer's poor results in its crucial clothing division

It means the group has now paid or declared £223million of special dividends and also returned £105million through share buybacks, in the year so far.

Broker Investec Securities was buoyed by the group's 'impressive momentum', advising investors to hold on to shares in the retailer.

'Next continues to take market share. Given the strength of full price sales growth, we believe there is scope for some gross margin improvements in the year despite tough competition in Q4,' Investec analysts said in a note