Join Hafta-Ichi to Research the article “Next boosts profit forecast as Covid crisis fuels online sales surge | Next”
Next upgraded its profit guidance by £30m for this year as a surge in online sales offset the impact of its shops being closed until 12 April.
The clothing and homewares retailer said it now expected profits to be £700m in the year to the end of January 2022, compared with previous expectations of £670m. The upgrade was partly because online sales had jumped 60% in the first eight weeks of the new financial year, compared with the same period two years ago.
Shares were up 2% on Thursday morning at £80.23, having hit a record high of £82.32 earlier in the session.
The pandemic has caused huge disruption to high street retailers, with 20 weeks of mandatory store closures and social distancing requirements since the end of March. Pre-tax profits at Next more than halved in the year to the end of January 2021, falling to £342m from £729m in the previous year. Revenues of £3.6bn were down by 17% over the same period, as sales in stores nearly halved year-on year to £950m.
However, growth in online sales made up for part of the decline. They grew to £2.4bn in the pandemic year, up from £2.1bn the year before.
The Next chief executive, Lord Simon Wolfson, said: “If we had been told 12 months ago that our shops were going to be shut for 20 weeks, we could not have imagined the group delivering the sales or profit we achieved last year. We have been very fortunate. For a number of different reasons, our business was well placed to cope with the pandemic.”
Wolfson said he expected in-store sales to decline by a further 20% in the coming year as the shift online continued.
“There remains a big question mark over the level of sales our stores will achieve when they reopen,” he said. “The pandemic has served to accelerate a pre-existing social trend – the move to more online shopping. History has been given a shove and, having moved forward, seems unlikely to reverse.”
Next’s resilience contrasts with many of its retail rivals. Department store John Lewis last month said it would shut more stores after losing £517m during 2020, while Marks & Spencer suffered its first loss in 94 years as a public company. Debenhams and Arcadia both collapsed.
Steve Clayton, a fund manager at Hargreaves Lansdown with funds holding Next shares, said it was “a remarkable achievement” for a fashion retailer to report a profit during 2020.
“The group saw the potential of online retailing years before their rivals took it seriously,” he said. “As a result Next was earning most of its money online, even before the pandemic struck. That has left it in a far stronger position than rivals.”
Source: The Guardian
Keyword: Next boosts profit forecast as Covid crisis fuels online sales surge | Next