Next raises profit and sales forecast as lockdown savings are unleashed

Next upgraded its full-year profit guidance for the sixth time in the past year, repaid some business rates relief and declared a special dividend after trading ahead of expectations during the second quarter.

Full-price sales at the fashion retailer in the 11 weeks to July 17 were up 18 per cent on the same period two years ago, before the pandemic struck. As a result, the company expected annual sales to grow 6 per cent, double its previous estimate.

It also expected an underlying pre-tax profit of £750m for the year to January 2022, about £30m ahead of its previous forecast. If achieved, this would be the highest level reported since 2017.

Shares in the FTSE 100 retailer rose 9 per cent in early trading on Wednesday, taking them back above £80. They have risen by more than half over the past year.

The chain attributed the surge in sales to pent-up demand, especially given the continued difficulty in taking overseas holidays, warm weather at the end of May and into June and the unleashing of lockdown savings.

Next said it would pay a special dividend of 110p per share — equivalent to £140m — in September and may make another special distribution at the end of the year. It plans to return to paying ordinary dividends in 2022.

The group will also return £29m of business rates relief it received in the current financial year. It said this represented relief granted for periods when its stores were open, which in England and Wales was from the middle of April onwards.

“We do not expect sales to continue at these exceptionally strong levels, but we are more optimistic about the outlook than we were three months ago,” the company said in a trading statement brought forward by two weeks.

Adult clothing sales fell 6 per cent but that was a considerable improvement on the 46 per cent fall reported in the first quarter, when bricks-and-mortar stores were closed.

Sales in stores were down 6 per cent in the second quarter to date, from a decline of 76 per cent in the first quarter. Online sales were up 44 per cent.

Childrenswear sales rose 12 per cent and homeware grew 40 per cent, reflecting the redirection of leisure spending into homes and gardens.

The upbeat announcement stands in contrast to that from online retailer Asos last week, which said restrictions on foreign travel and the cancellation of many festivals had hit spending among its customers, who tend to be younger than those of Next.

But it mirrors recent economic data as pandemic-related restrictions are rolled back across the UK. Retail sales in the April-June quarter grew at the fastest rate since records began, boosted by warm weather and the Euro 2020 football championship.


Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.