Next Raises Guidance In Unscheduled Trading Update

Next PLC has published an unscheduled trading update, advising that: 

• Trading in the last seven weeks has been materially better than the guidance we issued in May and we are updating the market accordingly.
  
  
• Full price sales(1) in the first seven weeks of the second quarter were up +9.3% versus last year. This compares to our guidance of -5%. In the period, we have beaten our full price sales estimates by £93m.
  
  
• We are upgrading our full price sales guidance for the full year by £137m and our full year profit guidance by £40m to £835m. 

REASONS FOR IMPROVED PERFORMANCE

We believe the reasons for the over-performance are as follows:

1) The change in weather. The onset of warmer weather has made a significant difference to our performance, particularly coming after a wet and cold April.

2) In an inflationary environment, annual salary increases deliver a significant uplift in real household income at the time they are awarded. For example, during April annual inflation(2) was running at 8.7% and monthly inflation was 1.2%; if an individual received a pay rise of 5.0%, then their real income would have risen by 3.8% in that month. We do not think it is a coincidence that sales stepped forward so markedly at a time of year when many organisations make their annual pay awards.

OUTLOOK FOR THE REST OF THE YEAR
If recent pay rises and the sudden change in weather have indeed contributed to the current over-performance, then it is reasonable to expect that the effect will diminish over time because ongoing inflation will slowly erode the positive effect of annual pay increases. This is why we are not anticipating the current performance to continue at the same level going forward, albeit we have moderately improved our guidance for the rest of the year (see guidance below).

GUIDANCE FOR FULL PRICE SALES AND PROFIT BEFORE TAX 

SECOND QUARTER TRADING STATEMENT

Our next sales update will cover the first 26 weeks of the year to 29 July 2023 and is scheduled for Thursday 3 August 2023. 

Source : Next PLC

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