Via Kristy Dorsey
As the retailer increased its profit outlook for the fourth time in five months after Christmas sales were much better than previously anticipated, shares in Next rose yesterday.
The FTSE 100 group has said it expects profit to hit pre-pandemic peaks next year, although the latest national closure will close all 500 stores for the first part of the new fiscal year starting at the end of January. The outlook for Next is for its retail stores to stay closed until the end of March.
Full-price sales were down just 1.1 percent from the same timeframe a year earlier for the nine weeks ended Dec. 26, far outpacing the previously predicted 8 percent fall.
Sales in UK stores slumped 43 percent as many stores had to close in the run-up to Christmas for health reasons, but the well-established online sector of the fashion retailer saw a 36 percent rise. In comparison to the poor demand for adult wear for work, parties and festivals, Next said homeware, children’s wear, loungewear and sportswear all did well.
The closure of Scotland after Christmas could cost stores £ 135 million a week, says SRC,
“We were surprised that business was so good despite the November closure,” said Managing Director Simon Wolfson, referring to the closure in England. “Our operations have kept up with demand, something we were concerned about in October.”
The company predicts a pretax profit of £ 370 million before special items for the current fiscal year, a small improvement from the £ 365 million expected in the last update in October.
This involves an expected 14% reduction in January in full-price retail sales due to the latest freeze in the four U.K. States, which would reduce profits by an estimated 18 million pounds. Next said that by moving typical Boxing Day sales from retail shops to online, it would also incur £ 5 million of extra costs, as the marginal cost of destocking is higher online than in stores.
A £ 40 million allowance for the valuation of brick-and-mortar stores contains extraordinary products for the current year, as their profits will continue to fall for the near future. Taking into account this and other extraordinary products, it is estimated that pre-tax income will be about £ 342 million.
As the sales decline accelerates, closures bring pressure on retailers
It is estimated that about half of the sales lost in stores will be moved online.
“That may be ambitious,”That may be ambitious,”We’re better positioned to deal with this lockdown than we were with the first one.”We are better placed to deal with this lockdown than we were with the first one.
The central outlook for the year to January 2022 is a pre-tax profit of £ 670 million, considering the disruption. That compares with a profit of GBP 729 million before the coronavirus reached the UK in the year to January 2020.
A shortage of shipping containers caused by pandemic-related disturbances, Mr. Wolfson said, suggests that many next shipments are two to three weeks late and stock levels are 10 percent lower than they were two years ago. All departments are impacted, but if stores were open, it would be a much bigger issue. By the end of March, inventories are expected to return to normal levels.
At the outset of the crisis, Next estimated that the financial consequences of the pandemic would be disastrous. The company cancelled its dividend and share buyback program in April to save £480 million as it cautioned that losses could hit £150 million for the current year.
Owing to the Scottish corona virus, retailers say high street footfall lean
Sales have, however, held up better than expected as Next has reaped the benefits of years of investment in its home shopping business. Richard Lim of Retail Economics said the findings of Next are likely to “set the tone for a polarized view of the retail sector,” favoring those with impressive online capabilities.
“Next continued to defy expectations against the backdrop of an extremely challenging pre-Christmas lockdown,” he said. During this main trading time, it was able to exploit its advanced online platform, offering customers easy ways to position their orders via an expanded click-and-collect