Next Plc raised its profit forecast for the fifth time as it rode out the surge in Omicron infections over the Christmas shopping season on demand for party dresses and formal clothing.

The British chain, with hundreds of stores across the country, expects profit of £822 million ($1.1 billion) in the current fiscal year, up from an earlier forecast of £800 million, it said Thursday. Next also declared another special dividend.

The retailer did warn of uncertainty as a result of the pandemic and rising inflation, with its own selling prices likely to rise about 6 percent in the second half of the year ahead. The shares declined about 1 percent in early London trading.

Simon Wolfson, chief executive officer of Next, said the economic impact of the omicron variant of Covid-19 on the clothing sector “was definitely exaggerated,” and its sales remained solid right up to Christmas Day.

Holiday Clothes

The UK government’s decision to allow households to mix over Christmas and New Year, even while warning people to have small gatherings and socialise with caution, helped with Next’s sales of formal-wear. “You are going to get dressed up for Christmas lunch whether there are six people or 60 people,” Wolfson told Bloomberg.

Next sees full-price sales growth of almost 13 percent this fiscal year, up from an earlier projection of 11 percent. It also expects a strong year ahead, with a pretax profit of £860 million and full price sales growth of 7 percent.

Next intends to return £205 million to shareholders through a 160-pence-a-share dividend, building on the 110-pence payout it made in September.

Wolfson said that while Omicron hadn’t impacted sales, it was causing rising staff absences in its stores and warehouses as employees isolated because of Covid.

“Absenteeism is definitely a factor at the moment and sickness levels are higher than we would normally expect at this time of the year,” he said, but added that it was manageable. “It is not something I am overly worried about at the moment.”

Wolfson said Next was having to deal with a number of rising costs, including wage inflation and higher freight rates. He said the supply crunch meant stock availability throughout the group was still constrained but some of this pressure will ease by April.

Rising prices are already having a noticeable impact on customer behaviour, he said, with some evidence that shoppers are buying fewer items, but at moderately higher price points, “perhaps exchanging volume for quality.”

By Deirdre Hipwell

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British Retailer Next Raises Profit Outlook Again

British clothing retailer Next raised its full-year profit outlook for the fourth time in six months as it reported a 5.9 percent rise in first-half profit on a two-year basis, benefiting from strong trading since Covid-19 restrictions ended.