COVID-19: Next raises profit forecast again as sales smash expectations

May 06, 2021

Next has raised its annual profit forecast again after sales during its first quarter beat the retail chain's expectations by £75m as coronavirus lockdowns eased.

The fashion-to-furnishings firm reported a 1.5% decline in full price group sales in the 13 weeks to 1 May compared to the same period two years ago - before the COVID-19 pandemic forced doors to periodically close.

The chain's earlier guidance had assumed a fall of 10% given uncertainty over the timing of reopening for stores.

Next said that as a result of the performance, it had raised its guidance for full year profit before tax - for the second time in as many months.

It was increased by £20m to £720m thanks mainly to the darling of its operation - online.

Total UK full price sales were 9% down on the same period in 2019.

Crucially, the company added that its previous prediction of sales guidance, a rise of 3% against two years ago, remained in place as it expected more recent pent-up demand to diminish.

Next said sales had been "exceptionally strong" over the past three weeks as physical stores reopened.

In a call with analysts, chief executive Lord Wolfson said the exit from the latest lockdown "feels like this might genuinely be the end of it."

Next reported that, versus two years ago, total full price sales were up 19% in the period - with like-for-like full price sales in stores up 2%.

Online sales were 52% higher, the company said.

The update adds to evidence of strong demand on the high street since non-essential retail was allowed to open its doors again following a horrific year for the sector that has resulted in a string of big name casualties, including Sir Philip Green's Topshop empire and Debenhams.

Primark has been among Next's rivals reporting "record" sales while another, Superdry, said on Thursday it had returned to growth in the final quarter of its own financial year.

The fashion chain said online and wholesale accounted for the recovery after pandemic disruption resulted in sales for the year to 24 April falling 21% to £557m.

Chief executive Julian Dunkerton said: "The early signs following the reopening of our UK stores are encouraging, as lockdown restrictions start to lift, and we can clearly see the light at the end of the tunnel."

Next shares - up 14% in the year to date ahead of the publication of the sales performance - closed 1.8% higher on Thursday.

A note by Jefferies Equity Research said the update confirmed a very strong reopening.

It added: "Perhaps the main news today is the resilience in online growth despite the current reversal in channel spend.

"A 3% upping of FY PBT (full year profit before tax) guidance assumes that pent-up demand will soon fizzle out. This may prove over-cautious as socialising occasions multiply in the weeks ahead."

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