Thursday 17 September 2020 8:35 am

Next raises profit outlook as sales rise

Retailer Next has raised its profit forecast for the second time in two months as it reported a strong recovery in online sales.

Read more: Next agrees deal to rescue Victoria’s Secret UK business and 500 jobs

The figures

Total sales in the first half of the year dropped 34 per cent on last year to £1.4bn, while brand full price sales dropped 33 per cent.

Online sales suffered a 14 per cent drop to £862.6m, while Next’s retail division took a hit from lockdown, plunging 61 per cent to £344.6m.

The retailer reported a staggering 97 per cent fall in profit before tax, down from £320m to £9m. This was in part due to costs related to property provisions for store impairment, stoc provisions and bad debt provisions.

Why it’s interesting

Online sales saw a steep decline in March as coronavirus restrictions were brought in as consumers adjusted to lockdown.

Between March and May, online sales dropped by 28 per cent after Next took the decision to close its warehouses and online operations.

From the end of May, online sales rose 21 per cent, better than Next’s pre-Covid period even once stores had opened.

The retailer raised its profit outlook for the second time in two months. The recent cool weather and lack of summer holidays drove full price sales up four per cent.

The retailer has revised its July forecast of £195m profit for the full year to £300m, but sharply down from the £729m reported in 2019-2020.

Richard Lim, chief executive of Retail Economics said: “Next is well positioned following years of investment in their digital proposition while many others remain in survival mode.”

“Their e-com platform, slick distribution centres and strategic partnerships have differentiated them from their competitors and they are well-positioned to capitalise on the new wave of online shoppers emerging due to the pandemic.”

Shares in Next climbed 2.04 per cent on open.

Read more: Co-op warns on outlook as revenue rises after lockdown shopping boom

What Next said

“The prospects for the next six months remain as uncertain as the outlook for the virus
itself; never has our guidance been more tentative or as broad in its possible outcomes”, the retailer said.

“But in all our guidance scenarios the Group generates a profit, generates cash and reduces its debts.”

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