Next outperforms expectations with sales down 28%
As the pandemic retreats, and the world learns to operate in a socially distanced way, the company said it was able to better understand both consumer demand and how its finances will be affected this year.
It said that its warehouse capacity had come back faster than planned, and store sales have been more robust than anticipated. As a result, online sales in the second quarter were up 9% and like-for-like sales in Retail stores, since they re-opened, were down 32%.
Stock was well controlled in the Q2 period. A combination of reduced stock purchases, carefully controlled cancellations and the "hibernation" of core lines for next year, meant that Next went into the end of season Sale with only 1% more stock than last year.
Markdown sales were down 12% and worse than the performance of full price sales in the same weeks, which were down 8%.
The business is now estimating a £195 million pre-tax profit, while it will pay off £460 million of its £1.1 billion debt.
In a statement, Next said "in retail we did not want to create the large queues normally associated with our end of season Sale, so we did not advertise the sale and we started the event early on a Thursday rather than Saturday to reduce the risk of overcrowding
"The Company is in a much better position than we anticipated three months ago: consumer demand has held up better than expected and our Online warehouses have achieved much higher capacities than we thought possible. Costs have been well controlled, and we have taken steps to ensure that our balance sheet is secure.
"Whilst much of our time has been focussed on managing the business through the pandemic, we have not lost sight of the fact our sector was already experiencing far-reaching structural changes as consumers increase their expenditure Online. If anything, these changes are likely to accelerate as a result of the crisis. So, we have continued to move the business forward, actively investing in the systems, Online capacity and business ideas that we believe will be important in a post pandemic world."
Julie Palmer, a partner at restructuring expert Begbies Traynor, said: “Next is a pioneer for the retail sector and has bucked the high street trend and seen sales start to climb against the grain of retail decline.
“But the fall-out from the coronavirus is the company’s latest test and Chief Executive Simon Wolfson will be wary that the challenges are only just beginning.
“The retailer has invested heavily in its digital offering, which has kept the business on solid ground, countering the drop in physical store sales. However, with low footfalls, the company will need to remain resilient and innovate to successfully navigate through the current uncertainty and attract consumers."
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