Next Increases Profit Guidance

Next has published its second quarter trading update.

Headlines

• In the second quarter full price sales1 were up +3.2% versus last year, exceeding our expectations by £42m. Given the exceptional summer last year, we had forecasted that Q2 would be down -0.3%.
  
  
• In the first half (H1), full price sales were up +4.4% versus last year. Our guidance for this period was to be up +2.5%.
  
  
• Total Group sales2, including markdown, subsidiaries and investments, in H1 were up +8.0%.

We have increased our profit guidance for the full year by +£20m to £980m, up +6.7% versus last year. The profit improvement came from additional sales (£11m) and cost savings (£9m), mainly in logistics.

¹ Full price sales include all items sold in NEXT Retail, NEXT Online including third-party brands, and NEXT Finance interest income, but excludes Sale events, Clearance, Total Platform commission and subsidiaries' sales.

² Total Group sales are the sum of total sales (full price and markdown) from all of the Group's divisions plus revenue from subsidiary companies.  Subsidiaries' turnover is calculated using our share of our subsidiaries' turnover.  For example, we own 74% of Joules so we include 74% of their sales in our top line.

Sales Performance

The weather last summer was exceptionally favourable for clothing retailers, so we had planned for full price sales to be down -0.3% in the second quarter this year.  Our full price sales in the UK (Online and Retail combined) were only slightly ahead of our expectations, up +0.4%; Overseas sales online were much better than expected, and were up +21.9%.

Group sales, which includes sales in our subsidiaries, were up +8.0% in the first half.  The additional growth in Group sales came from the acquisition of FatFace and an increase in our shareholding in Reiss, both of which occurred in Q3 last year.

Full price sales performance versus last year, by business division, is set out below for the second quarter and the first half. 

End-Of-Season Sale

Last year's surplus stock was particularly low, and was down -22% on the previous year.  This year we returned to more normal levels of surplus and, as planned, went into Sale with surplus stock up +21% on last year (down -5% on two years ago).  Clearance rates are in line with our internal forecasts.

Full Price Sales For The Rest Of The Year

We are maintaining our guidance for full price sales in the second half to be up +2.5% versus last year.  This might seem cautious when compared with the performance in the first half, which was up +4.4%.  However, when compared to two years ago, growth in the first half and the forecast for the second half are almost identical.  The table below shows our forecast growth for both halves of the year compared to last year and two years ago.

Guidance For Sales, Profit And Earnings Per Share

Our revised guidance for sales and profit³ for the full year is summarised below. 

³ NEXT Group profit before tax excludes: (1) the cost of brand amortisation, (2) the profit attributable to shares that we do not own in subsidiary companies, and (3) an exceptional, non-cash, loss relating to the closure of our defined benefit pension scheme. 

Total Group sales for the full year are expected to be up +6.0% on last year, which is +2.6% higher than our expected growth in NEXT Trading full price sales of +3.4%.  The difference is the result of acquisitions completed during last year.  We acquired 97% of FatFace in October 2023 and increased our equity share in Reiss from 51% to 72% in September 2023. 

Interim Results

We are scheduled to announce our results for the first half of the year on Thursday 19 September 2024.

Source : Next plc

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