UPDATE 1-Next ups profit guidance after strong quarter

Wed Apr 30, 2014 3:37am EDT

(Adds detail, CEO comments, shares)

LONDON, April 30 (Reuters) - Next, Britain's second biggest clothing retailer, raised its guidance for annual sales and profit after posting strong trading in its first quarter that reflected better weather in the run up to the late Easter holiday.

Next, which trades from over 500 stores in Britain and Ireland, almost 200 stores in more than 40 countries overseas, and via its Directory internet and catalogue business, said on Wednesday it now expected a 2014-15 pretax profit of 750-790 million pounds ($1.26-$1.33 billion).

That compares to previous guidance of 730-770 million pounds, and would represent growth of 8-14 percent on the 695 million pounds made in 2013-14.

Shares in Next, which have risen 49 percent over the last year, were up 2.3 percent at 6,632.4 pence at 0718 GMT, valuing the business at 10.2 billion pounds.

Next's total sales rose 10.8 percent in the 13 weeks to April 26.

"It was a little bit ahead (of internal expectations) but last year retail had really poor weather - a big freeze in early February, a very cold and early Easter. This year Easter was late and warm," Chief Executive Simon Wolfson told Reuters.

Next said sales at stores rose 8.8 percent, while Next Directory sales were up 13.7 percent.

The firm raised its full-year sales growth guidance to 5.5-9.5 percent from 4-8 percent previously and its earnings per share growth guidance to 8-14 percent from 5-11 percent.

Britain's recovery from its deepest recession in decades passed a milestone earlier this month when official data showed wages growth caught up with inflation for the first time in nearly four years, while unemployment sank to a five-year low.

Data on Tuesday showed Britain's economy racked up its strongest annual growth in more than six years in early 2014.

Wolfson, who sits in Britain's upper house of Parliament and is a prominent supporter of the prime minister's Conservative Party, said although there were signs the economy was improving he remained concerned about the prospect of interest rate rises and house price inflation getting out of control.

"There is evidence, particularly in the south east (of England), of a property bubble. There's no question that when interest rates go up that will moderate the recovery," he said.

Wolfson noted that Next's demographic was particularly exposed to interest rates.

"A 25 to 40-year-old customer with children is more likely to be exposed to rising interest rates than a younger or older customer so Next is particularly vulnerable to rising interest rates," he said.

Next also said on Wednesday it will pay another special dividend, its third this year, of 50 pence.

It will distribute surplus cash through more special dividends as long as its share price remains above 6,400 pence.

($1 = 0.5936 British Pounds) (Reporting by James Davey, Editing by Paul Sandle and Kate Holton)