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Monday, January 24, 2022

Britain’s Next raises profit guidance for fifth time in 10 months

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LONDON -British clothing retailer Next on Thursday beat guidance for sales in the run-up to Christmas, benefiting from a revival in demand for adult formal and occasionwear, and raised its full-year profit outlook for a fifth time in 10 months.

Next, which trades from about 500 stores and online, said full-price sales rose 20% in the eight weeks to Dec. 25 versus the same period in its 2019-20 year, before the pandemic impacted trading. That compares to guidance of a rise of 10.2%.

It forecast a full-year 2021-22 pretax profit of 822 million pounds ($1.1 billion) up from the 800 million pounds previously guided and up 9.8% versus 2019-20.

As the first major British retailer to update on Christmas trading, Next set a high bar for rivals to follow as a strong online performance more than offset another fall in store sales.

Online sales rose 45%, while retail sales in the UK and Ireland fell 5.4%.

The group had expected sales growth in its fourth quarter to be weaker than the third.

However, it said a strong revival in Next branded adult formal and occasionwear significantly improved sales throughout the period.

Next has proved a resilient performer during the pandemic, benefiting from its long-established online operations.

Rivals with weaker or no online business, notably Primark, have seen large falls in sales. Others, such as Topshop-owner Arcadia, and Debenhams have gone bust.

Next said its initial guidance for the 2022-23 year is for full-price sales to rise 7% versus the current 2021-22 year ending January 2022. It estimated its pretax profit would rise 4.6% to 860 million pounds.

The group said pressures on consumers’ finances pointed to a tougher trading environment in 2022.

It forecast its prices would rise 3.7% in the first half and 6.0% in the second half due to higher freight rates and increased manufacturing costs.

Next also declared a further special dividend of 160 pence per share, worth 205 million pounds, to be paid at the end of January and said it intends to return to its pre-pandemic dividend cycle in the 2022-23 year.

Next shares, up 9% over the last year, closed Wednesday at 8,038 pence, valuing the business at 10.7 billion pounds.

($1 = 0.7400 pounds)

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