Next Q3 sales up 17% but warns on 'diminishing' demand
Fashion retailer Next reported a 17% rise in full-price sales during the third quarter compared to pre-pandemic levels but warned that momentum would slow in the final three months due to diminishing pent-up demand and supply-chain constraints.
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The company on Wednesday said sales in the five weeks to October 30 were up 14% compared with forecasts of 10% since its last update in September. It also maintained its annual pre-tax profit guidance of £800m and final quarter revenue growth of 10%.
“During the last five weeks we have beaten our full price sales forecast by £14m which generated around £4m of profit. We anticipate that this will be largely offset by further investment in digital marketing and increased use of inbound air freight and other online distribution costs,” the company said in a trading statement.
“Stock availability has improved but remains challenging, with delays in our international supply chain being compounded by labour shortages in the UK transport and warehousing networks. However, to date, stock limitations appear to be offset by strong underlying demand.”
Next said that although consumer finances “are in good shape”, price increases in essential goods such as fuel” may moderate demand for more discretionary purchases”.
Online sales were also up 49.5% in the year to October, while retail purchases were down 28.8%.
AJ Bell investment director Russ Mould said the trading statement's cautious tone was justified.
"Family finances are coming under pressure from the higher cost of living and expectations of a near-term rise in UK interest rates could put a further squeeze on anyone with variable-rate borrowings," he said.
“The extra profit it has made in the past five weeks, beyond that originally forecast, will be gobbled up by costs related to marketing and transportation, hence why it isn’t raising full year profit guidance after a bumper third quarter.”