Next warns of new year sales slide and stock delays after festive boost
High street stalwart Next has said festive sales were better than expected, but warned the trading boost will be “almost entirely” wiped out by the latest lockdowns.
The fashion and homewares chain also said it was seeing stock delays of up to three weeks due to pandemic disruption on shipments from the Far East, which has left stock levels 10 per cent lower than two years ago.
However, bosses expect stock issues to “steadily improve” and return to more normal levels by the end of March.
Next now expects pro-rata 52-week annual profits of £370 million for the year to the end of January, against the £365m previously pencilled in.
Profits on a 53-week basis will be hit further by a £40m property provision and are expected at £342m.
Full-price sales over the nine weeks to December 26 fell 1.1 per cent, which was better than the 8 per cent drop it had been braced for and came despite tighter restrictions.
Freetrade analyst David Kimberley said: “If you had to pick a firm that was going to survive a pandemic 12 months ago, the chances are a UK retailer wouldn’t have been at the top of your list. But the past year has shown why so many investors love Next.
“The firm looks set to turn a profit and has also managed to slice away a substantial chunk of its debt – no mean feat given that large numbers of its physical stores had to stay shut for much of 2020.
“That’s exactly the sort of resilience that investors are always looking for and it explains why shares in the firm have recovered to near pre-covid highs, while much of the rest of the UK market has lagged behind.”
He added: “Conspicuously absent from today’s update is any mention of Arcadia. Any negotiations for Topshop will probably be in early stages but they’re still likely to make some shareholders feel a little nervous.”
Next’s profits were on track to hit £393m before the latest lockdowns on both sides of the Border, with lost sales in January set to cost it £18m.
The group warned that total full-price sales are set to tumble by 14 per cent in January, which will leave full-year sales 16 per cent lower. It has also taken a £5m hit from higher costs of switching its end-of-season sale online.
The group told investors: “Profit gained from the overperformance in November and December has been almost entirely offset by the anticipated loss of full price retail sales in January due to the lockdown closure of 90 per cent of our stores (and) the additional costs we have incurred clearing more of our retail end-of-season sale stock online.”
Richard Hunter, head of markets at Interactive Investor, said: “Next continues to wade through treacle, with further online growth being offset by another blow to its retail business. Even so, the group is continuing to navigate a difficult time with aplomb.
“If it is possible for there to be any benefit from a third lockdown for retailers, it is that they have a grasp of what to expect having become unwillingly experienced from the previous ones.”
A message from the Editor:
Thank you for reading this article. We’re more reliant on your support than ever as the shift in consumer habits brought about by coronavirus impacts our advertisers. If you haven’t already, please consider supporting our trusted, fact-checked journalism by taking out a digital subscription: www.u2swisshome.com/subscriptions
Want to join the conversation? Please or to comment on this article.