Next upgrades profit guidance as sales beat expectations
Next upgraded its profit guidance after sales in the first half and beyond held up better than the company expected.
The FTSE 100 clothes retailer increased its central guidance for annual pretax profit to £300m from £195m. Pretax profit in the six months to July dropped to £9m from £320m as group sales fell 34% to £1.36bn.
Net debt fell by £347m to £765m and the company predicted debt would fall to £650m by the end of the year.
Next Chief Executive Simon Wolfson said sales were better than expected during the Covid-19 pandemic and that business had continued to hold up in the second half. Full-price sales in the past seven weeks rose 4% helped by recent cool weather and fewer overseas holidays.
He said Next's performance was helped by the strength of its online operation, which accounted for more than half of turnover before the Covid-19 lockdown. Sales of homeware, children's and leisure clothes also helped offset a sharp drop in suits, formal shoes and other items that were in low demand with the economy shut down.
Wolfson, known for his gloomy forecasts, said the outlook was very uncertain but that he was confident about Next's prospects.
"Standing as we are, in the midst of the pandemic, with no sign yet of abatement or vaccine, it might seem odd that the essential tone of this report is optimistic. Particularly, some might say, coming from Next," Wolfson said.
"But in all our guidance scenarios the group generates a profit, generates cash and reduces its debts. So we can look to the end of this extraordinary time - whenever that may be - in the belief that we can build on the strength of the Next brand, its people and its infrastructure along with all the new opportunities those assets might deliver.