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Next ups profit guidance as summer sales exceed expectations

TheIndustry.fashion
28 October 2020

Next has revealed better-than-expected sales over the summer, with strong trading in children’s clothing and homeware products, although there was a fall in formal and party clothes due to the pandemic.

The company said total sales in the three months to 24 October rose 1.4% – or 2.8% when interest from consumer credit is included.

The company said it now expects pre-tax profits for the year to hit £365m – £65m more than first expected – with net debt forecast to fall by £487m to £625m.

In a statement to the London Stock Exchange, Next said: “The sales performance by product category remains very similar to the second quarter, with home and childrenswear over-performing while demand for men’s and women’s formal and occasion clothing remains weak.

“Online sales remain strong, both in the UK and overseas. In retail, out-of-town retail parks continue to perform better than high streets and shopping centres.”

The number of products sold with a markdown – in the sales – fell 12.3% against a year ago, although Next explained this was due to fewer customers in stores and a focus in its warehouses of full priced goods.

Sales outperformed particularly strongly in the final two weeks of August, as the Government was encouraging workers back to offices and before the Rule of Six was introduced.

They fell sharply in September, but regained momentum in October and beat sales from a year earlier.

Online sales remain strong, jumping 23.1% in the three months to October 24, although store sales continued to be weak – down 17.9% during the period.

Laying out three scenarios for the all-important Christmas trading period, the company said sales could fall 8% based on their “central scenario”, which includes further lockdowns, customers avoiding busy stores in the run-up to Christmas, and increased self-isolation.

An “upside” scenario predicts a flat period of sales, compared with last year, where “busier stores prove no further deterrent to retail shopping”, and no further lockdowns.

The “downside” one would see a two-week lockdown, with sales falling 20%.

Next added: “The biggest single unknown is whether England, Scotland and Northern Ireland will follow Wales’s decision to shut non-essential retail shops.

“A two-week lockdown in England, Scotland and Northern Ireland in November would reduce retail full-price sales by around £57m (depending on timing).”

“We have found no evidence of the virus being transmitted in our stores, nor are we aware of any studies that suggest clothing and homeware retail presents a significant risk of infection.”

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