Next Raises Profit Guidance

Next has reported on sales for the 26 weeks to 27 July 2019, advising that Q2 full-price sales were up +4.0% on last year, and first-half sales were up +4.3% on last year.  Total sales, including markdown sales, were up by 3.8%

- Full year full price sales guidance increased from +1.7% to +3.6%
- Full year profit guidance increased by £10m to £725m (+0.3% on last year)
- Earnings Per Share guidance increased from +3.4% to +5.2% on last year

Second Quarter Analysis – 13 weeks to 27 July
Full price sales in the second quarter have been better than we anticipated and were up +4.0% on last year. This was 4.5% better than the guidance of -0.5% given in our May Trading Statement. A closer examination of the quarter’s performance by month shows that full-price sales during May and June combined were up +3.0%; July was particularly strong and up +6.8% on last year. However, some of July’s over-performance in full-price sales came as a result of lower markdown sales in our end-of-season Sale. We believe that the sales performance in May/June is a better guide to underlying growth and we have used this number as the basis for our second-half guidance.

We went into the end-of-season Sale on 6 July, with surplus stock down -1% on last year. Clearance rates to date (the percentage of Sale items that have been sold) are -2% lower than expected. As a result, we have adjusted our guidance to assume a similar reduction in Sale clearance rates in the second half.

Sales, Profit and EPS Guidance For The Full Year
Following the better than anticipated sales performance in the second quarter, we are increasing our full price sales guidance for the second half from +1.7% to +3.0%, in line with our full-price sales growth in May and June.

The increase in our full-price sales guidance is £70m and, after accounting for associated costs, is expected to add £20m to profit. Lower clearance rates to date, along with anticipated lower clearance rates in the second half, are forecast to cost an additional £10m. As a result, we are increasing our guidance for full-year Group profit by £10m to £725m, marginally up on last year. We now expect Earnings Per Share to grow by +5.2%.

Next is scheduled to announce results for the first half of the year on Thursday 19 September 2019.

Source : Insight DIY Team and Next

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