Next lifts guidance as annual profits more than halved
Clothing retailer Next lifted current year profits guidance as online sales continued to soar during the Covid lockdown, despite annual profits halving.
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The company on Thursday said it now expected profits of £700m, up £30m after a boom in sales during February and March. Pre-tax profits for the year to January 31 fell to £342m, in line with expectations, but still down from £729m a year earlier. Dividend payments remained suspended and debt was cut by £502m to £610m.
Total group sales fell 17% to £3.6bn as stores were shuttered during the pandemic.
Although Next lost £368m from Covid-related shop closures in the second half, online sales almost entirely offset the decline. Next widened its online customer base by 40% to 8.4m last year with online sales accounting for nearly half of turnover.
“In the first eight weeks of the year, online sales have been stronger than expected and are up more than 60% on two years ago,” the company said.
“Looking ahead, there is more uncertainty than ever – the consumer economy, future lockdowns and more,” said chief executive Simon Wolfson.
“But there is one thing about which we are sure: our business will emerge from the pandemic better placed to meet the challenges and opportunities of the online era than it was at this time last year.”
Forecasts for full price sales versus 2019-20 - a two-year comparison - were maintained at flat.
Interactive Investor analyst Richard Hunter said while Next’s decision not to pay a dividend and maintain the suspension of buybacks may come as a disappointment to investors "the decision may yet turn out to be prudent if a wave of unemployment and subdued consumer sentiment results from the removal of government aid later this year".
"The sharp decline in the share price as the initial full lockdown kicked in flatters the recent performance, with the shares having surged 93% over the last year as compared to a rise of 23% for the wider FTSE100. Even so, the direction of travel has been restored and by way of comparison the shares are up by 41% over the last two years."
"Next has attracted high expectations for some considerable time and regardless of its performance and progress, the market remains a tough nut to crack. Although the financial resilience of the company has been demonstrated during an extraordinary time and despite an upbeat outlook, the general view of the shares as no more than a strong hold is likely to remain intact.”