Next: Annual Group Sales Increase Of 3.3%

NEXT has reported on trading for the full year ended January 2020.  Excerpts from the publication follow.

Financial headlines:

- Brand full price sales were up +4.0% and Brand total sales (including markdown sales) were up +3.5% on last year. 

- Group profit before tax was up +0.8% and Earnings Per Share (EPS) were up  +5.6% on last year. 

- Group profit of £728.5m was just ahead of the guidance of £727m given in our January 2020 Trading Statement due to better than expected full price sales in January. 

CHIEF EXECUTIVE'S REVIEW - OVERVIEW

CORONAVIRUS - SUMMARY OF IMPACT ASSESSMENT

As might be expected, we begin with a summary of the risks that coronavirus poses to the business and the actions we are taking to weather the storm.  When the pandemic first appeared in China, we assumed that the threat was to our supply chain.  It is now very clear that the risk to demand is by far the greatest challenge we face and we need to prepare for a significant downturn in sales for the duration of the pandemic.

We have no experience of a similar crisis so there is no way of predicting the extent that the effect coronavirus will have on our Retail and Online sales.  It is not yet clear how widespread the virus will be at any one time, how long the pandemic will last and what the medium to long term effect of this pandemic will be on consumer behaviour.

What we can say

The evidence we have from sales to date in the UK and from our (small) international websites in the worst affected countries is that:

●     Demand will be the biggest issue and although the virus is likely to impact our operations, we do not believe this will be as damaging as the very significant drop in sales sustained both in Retail and Online.

●    Online sales are likely to fare better than Retail but will also suffer significant losses.  People do not buy a new outfit to stay at home.  There is some evidence from our overseas sites that as restrictions on movement increase, the difference between Online and Retail sales performance widens, with Online picking up a small amount of the business that cannot be carried out in store.

●   Some product areas are likely to fare better than others.  To date, our homeware and childrenswear sales appear to be less affected than our adult clothing lines.

Priority

Our priority is to do all we can to keep our workplaces and shops as safe as possible for customers and staff.  At the same time we must prepare the business for varying levels of sales declines.  To that end we have modelled the effects of differing levels of sales declines along with all the measures we can take to ensure that the Company remains within its bond and bank facilities.

Coronavirus stress test

In our Outlook section (page 37 of full results report) we have included a detailed stress test that gives the likely cash and profit impact for different levels of sales decline.  The scenarios model full price sales losses of £445m, £820m and £1bn respectively.  These declines represent -10%, -20% and -25% of our annual turnover.

Conclusion of stress test

The conclusion of our stress test is that the business could comfortably sustain the loss of more than £1bn (25%) of annual full price sales, without exceeding our current bond and bank facilities.  This accounts for the business rates holiday announced by Government but excludes any use of Government lending or any measures that may be introduced to help with wages during closure.

Source : Next PLC

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