Next boosted by sunny weather but the outlook is still cloudy

Sad is not an adjective one would normally use when shares in a retailer jump by 10 per cent, but it’s still appropriate for Next.

The clothes retailer’s CEO Lord Wolfson regularly used to tell the city that while the business was doing well, people shouldn’t get too excited.

Then, when the next trading update was due, Next would inevitably show a clean pair of heels to investors’ modest expectations.

More recently, Next has been doing something rather different. “We’re doomed, doomed I tell you!” has been the message.

Not so long ago the company even put forward a scenario where the entire bricks and mortar estate disappeared leaving only the online directory business (which has been doing well).

Lo and behold, following those gloomy predictions, the latest trading statement has turned out to be better than expected. Or rather, it's not as bad as had been feared. Which is what's rather sad when you consider how well Next was doing not so very long ago.

The shares were, at one point during Thursday's trading session, the best performers among big companies across Europe, rising by more than 10 per cent. They came back a bit, but still finished 9.7 per cent ahead, good for about half a billion pounds on the value of the company.

Expectations management being one of Lord Wolfson’s greatest talents, you would expect him to be saying “calm down" at this point.

Investors really should do that. Next did do quite a bit better than expected in June and July, which pushed the second quarter of the year into positive territory (sales up 0.7 per cent). The company also tweaked its full year forecast to make it look a bit better.

But that’s as far as the good news goes.

For a start, a big part of the improved performance was down to the weather and that's not something anyone should be relying on in Britain.

Even with the boost it brought, Next is still behind where it was last year, with year to date sales down 1.2 per cent. That figure masks the performance of the stores, which was dismal. They showed a fall of 7.7 per cent, which even the 7.4 per cent growth in the Directory business couldn’t entirely compensate for.

There might be something in Lord Wolfson’s grim predictions for the future of the traditional retail estate.

In the meantime, while Next is selling a few more clothes as a business overall, there has been no change to the profit forecast.

So investors might be wise to calm down, or even to cash in on the shares’ rise. It might very well prove to be as temporary as the sunny weather that caused it.