Next: 2021 Performance Exceeded Expectations

Next has published full-year results for the year ended 31st January 2022.

HEADLINES

• Brand full price sales1 up +12.8% versus 2019/20 (and +32.4% against 2020/21).
• Profit before tax of £823m, up +10% versus 2019/20 (and +140% against 2020/21).
• Earnings Per Share of 530.8p up +12% versus 2019/20 (and +138% against 2020/21).
• Year end net debt (excluding lease debt) of £600m, down -46% versus 2019/20.

PERFORMANCE LAST YEAR AND GUIDANCE FOR THE YEAR AHEAD

2021/22 - A Good Year
Last year exceeded all our expectations. In the first quarter, during lockdown, we made up for much of the lost Retail sales through Online sales, particularly homeware and children’s clothing. In the second half, despite stock shortages, we were able to scale up Online operations to meet pent-up demand for adult clothing. We believe that the second half performance was, in a large part, fuelled by the release of consumer savings accumulated during lockdown.

We have launched four new clients on Total Platform, with that business delivering a year one profit of £10m and expected to deliver circa £20m in the year ahead.

2022/23 - Profit Guidance Moderated in an Increasingly Uncertain World
The buoyancy of our sales last year, along with the benign economic environment that accompanied it, make comparatives in the year ahead challenging. Last year’s strength contrasts with this year’s unusually high level of geopolitical and economic uncertainty. The combination of these factors make accurate guidance particularly difficult.

In our January Trading Statement we set out the reasons for taking a more cautious approach. We highlighted five big uncertainties which tempered our expectations. These were: (i) the unwinding of pandemic savings, (ii) a return to spending on travel and leisure, (iii) inflation in competing essential goods, (iv) inflation in NEXT’s selling prices, and (v) likely increases in UK taxes and mortgage rates. At that time, we had not contemplated that a war in Ukraine might add to the cocktail of uncertainties. Weighed against these negative factors, nominal wage inflation is running at 4.8%3 and UK employment rates remain strong.

It is difficult to draw too many conclusions from sales this year in January, February and March, because our stores were shut for the entire period last year. So far this year, UK sales are ahead of where we expected them to be, mainly driven by better than anticipated sales in our Retail stores. We are also seeing a very sharp reversal of lockdown fashion trends, with a return to more formal dressing and notable reduction in spending on Home and very casual clothing.

After accounting for the combination of: (1) the loss of £18m of profit from the closure of our Ukrainian and Russian businesses and (2) better than expected sales in the UK, we are reducing our central profit guidance for the full year by £10m to £850m, a reduction of -1.2%.

Outlook for the Year Ahead

• Following the closure of our websites in Ukraine and Russia, and after moderating growth
• expectations in some other overseas territories, we have lowered our sales guidance for
• 2022/23 by £85m (-2.0%) and profit guidance by £10m (-1.2%).
• In our new guidance, an improved outlook for UK Retail sales has mitigated the anticipated loss of lower margin sales overseas and the associated cost of increased markdown.
• Our central scenario for the year ahead is that full price sales will increase by +5.0% and that Group profits will increase by +3.3% to £850m.
• Year end net debt is forecast to rise in line with anticipated profits to £620m, up +3.3% versus 2021/22.
• Earnings Per Share forecast to be 556.6p, up +4.9% versus 2021/22.

Chairman's Statement:

2021 was another exceptionally productive year for NEXT as we worked hard to adapt and develop our business to enable us to maximise the opportunities of an increasingly online world. An analysis of our performance in 2021/22 and our outlook for the year ahead are covered in detail in the following pages but, looking back on the year, among the highlights are:

• Delivery of record high Earnings Per Share (EPS).
• Growing our third-party branded business LABEL, with the addition of new brands, extending the ranges from existing partners and increasing the number of brands using the Platform Plus and Direct Dispatch operating models. We have further enhanced our branded offer through the manufacture of products under licence from partner brands.
• The outstanding job done by our warehouse team to keep up with servicing the growth in demand online.
• The better than expected performance of our Retail business, when our stores reopened in April following lockdown at the start of the year.
• Increasing the number of Total Platform client brands, with the recent launch of Reiss being our most ambitious and comprehensive Total Platform project to date.
• Significant capital investment programmes, including a highly automated warehouse and modernising our website software.
• Restarting dividend payments, with two special dividends paid in September 2021 and January 2022. 

In the year ahead we will return to our pre-pandemic ordinary dividend cycle. During the year, we were delighted to welcome Soumen Das to the Board as a non-executive director. His property knowledge, financial acumen and listed company experience have enhanced the strength and depth of the existing Board’s capabilities.

I am very proud to see how everyone within the business has embraced our challenges, opportunities and ambitions. I would like to thank them for this, and also for the continued commitment that they have shown over the past two years whilst having to deal with disruption to both their work and personal lives due to the pandemic.

We enter 2022 with confidence in the outlook for our business and its ability to continue its successful evolution. The effects of the pandemic are ongoing and we remain mindful of macroeconomic and geopolitical risks, but our continued investment over many years in our people and our systems has generated strong and resilient results in the past year and we believe that it will continue to do so.

Source : Next PLC

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