Next raises profits guidance helped by online shopping boom, but cautions of high street difficulties ahead

Next has upgraded profits guidance

1 April 2021

Next has defied industry gloom to upgrade profits guidance despite Covid-19 disruption that has hammered much of the high street.

The FTSE 100 firm said it had been very “fortunate” as the business was well placed to cope with the pandemic, although it did caution over further tough times ahead for physical retailers.

Chairman Michael Roney said: “I believe that in difficult times there is a clearer separation between the stronger corporate performers and the weaker ones.”

The comment came as Next posted full-year figures that showed sales declined by less than 17% despite stores being closed for some 20 weeks. Pre-tax profits slid by 54% to £342 million, in line with guidance.

But Next added that in the first eight weeks of this year online sales have been stronger than expected and are up more than 60% on two years ago. Next said it is raising profit guidance from £670 million to £700 million for the year to January 2022.

Shares in Next, which is led by Lord Simon Wolfson, improved 2.2%, or 176p, to 8042p.

The performance comes despite a brutal time for the high street, with lockdowns adding to existing headaches retailers were already facing pre-pandemic, from high business rates to online competition. Topshop-owner Arcadia and Debenhams are among the casualties in recent months.

Wolfson, whose in-depth reports are viewed as essential reading in the retail sector, pointed out that Next benefited from already making over 60% of its sales from online before the virus crisis.

‘Non-essential’ retailers are set to reopen stores from April 12, but Wolfson pointed to difficulties ahead for the wider high street due to more people embracing and liking digital shopping during the pandemic.

Wolfson said: “The longer the pandemic encourages online shopping, the more likely it is that customers will keep shopping that way. What might start as an experiment or lockdown necessity, over time, becomes increasingly normal and convenient.”

He told the Standard: “We anticipate like for like retail sales in stores will continue to fall for the forseeable future.”

Next has over 500 stores and will continue to look to negotiate better rent terms as lease renewals come up.

The company has made a number of investments over the last year, including a 25% stake in London-founded fashion firm Reiss.

Next has also benefited from its ‘Total Platform’ being used by a number of third parties. It offers a variety of services, from running websites to warehousing. The company takes a commission from clients from their online sales.

Businesses hope this will be the final lockdown

A business lobby group that represents over 600 firms in central London, today said it hopes this Easter will be the final key trading period that retailers and hospitality operators will have to miss out on.

Numerous high street firms have had a turbulent 12 months due to Covid-19 lockdowns. There have been temporary store closures at various points, include just before Christmas in London.

Jace Tyrrell, chief executive at New West End Company, said: “Easter weekend usually marks three peak trading days for West End retailers as consumers take advantage of better weather and two bank holidays to enjoy the unique West End seasonal offers, experiences and hospitality.”

‘Non-essential’ retailers are set to reopen from the latest lockdown on April 12. Tyrrell added: “With just over a week until reopening, we hope that this weekend will be the final key trading period that our businesses will miss out on and that this spring marks the start of recovery as we work toward mitigating the cost of the pandemic.”

MORE ABOUT

Retail

Read More

Read More

Next raises profits guidance helped by online shopping boom, but cautions of high street difficulties ahead