Next ups profit forecast again following sales surge

Next has increased its full-year profit forecast for the third time in less than a year following a surge in sales.

The British fashion retailer increased its central guidance for full year profit before tax by 20 million pounds to 720 million pounds, thanks to a mix of strong e-commerce sales and a bounce-back of its physical stores since reopening in the UK last month.

It comes after the company already upgraded its forecast by 30 million pounds in April.

Full price sales in the thirteen weeks to May 1 were 75 million pounds ahead of forecast, down 1.5 percent compared to 2019 levels - significantly better than the 10 percent drop it had previously expected.

The retailer compared its current results with those from two years ago as it said “this is more meaningful than comparing with 2020/21, which was affected by Covid”.

The company said sales in the past three weeks have been “exceptionally strong” since stores in the UK have reopened.

Total full price sales were up 19 percent, with sales in like-for-like retail stores up 2 percent and online sales up 52 percent.

Strong sales as lockdown eases

However, the company warned that this sales surge might not last long. “Evidence from last year suggests that this post lockdown surge will be short lived, and we expect sales to settle back down to our guidance levels within the next few weeks,” the company told shareholders.

The retailer is therefore maintaining its sales guidance for full price sales for the rest of the year to be up 3 percent versus 2019. This guidance assumes retail sales will still be down by 20 percent and online will be up by 24 percent.

“These are terrific results against an incredibly tough backdrop for the retail sector,” commented Retail Economics CEO Richard Lim in a statement. “Despite mass store closures, the business pivoted its proposition towards home furnishings, its overseas presence and third-party labels, while maximising its online advantage.”

Lim said Next is benefiting from the “vast sums” invested in its online operation and its “well-established partnership approach which pre-empted where the industry was heading”.

He said: “As expected, apparel remained under significant pressure as lockdown restrictions and the shift towards home working undermined demand for clothing. But as the economy reopens and lockdown restrictions ease, the business is well-positioned to benefit from a considerable amount of pent-up demand.”