Next Reports Good First Half; Cuts Guidance

Next has reported on first half trading, covering the six months to July 2022.

Headlines

• Brand full price sales1 up +12.4% versus 2021 (and +22.3% against 2019).
  
  
• Profit before tax of £401m, up +16% versus 2021 (and +22% against 2019). 

Guidance for the Full Year to January 2023

• August trade was below our expectations and cost of living pressures are set to rise in the coming months. Sales in September have improved, and we may see benefits from recent Government measures. It is a very difficult call but, on balance, we have decided to reduce our forecast for full price sales in the second half from +1% to-1.5% versus last year.
  
  
• We have reduced our profit guidance for the full year from £860m to £840m, up +2.1% on last year.
  
  
• Earnings Per Share, assuming the recently announced change in UK corporation tax rate is enacted before the year end, is forecast to be 545.1p2, up +2.7% versus 2021.

Overview

A Good First Half

We had a good first half, with overall sales ahead of expectations, driven by the over-performance of our Retail stores and a strong performance from the formal parts of our clothing ranges. Sales were stronger than anticipated and they delivered better than expected profits; albeit margins were somewhat reduced by the (1) increasing costs of servicing our Online business overseas and (2) increased expenditure on software development.

Moderating Expectations in an Uncertain Environment

Sales during August were below our expectations and, despite improving sales in September, we think it is sensible to moderate our expectations for sales and profit in the second half. It is important to stress that, with so many variables at play, predicting near-term sales trends is unusually difficult.  All the more so with recent Government stimulus measures yet to take full effect.

Success Through Adversity

We may have been too pessimistic; we may have not been pessimistic enough. Either way, success through adversity will not depend on our ability to foresee the future. It will depend on how well we adapt the business; to recognise and face up to whatever challenges materialise; and seize the opportunities that will inevitably arise. So that, when the storm has passed, NEXT emerges a stronger and better business than it is today.  To that end, our priorities are clear.

Clear Priorities

A less benign environment will not deflect us from our endeavours to improve and extend our product offer. Nor will we slow the development and modernisation of our technology platform and the services we provide through Total Platform. Nonetheless, as Online sales growth begins to moderate from pandemic highs and cost price inflation continues, we are very clear where the opportunities lie and what we need to do:

• Achieve better operating efficiencies in our Online warehouse and distribution operations.
• Improve the speed, accuracy and consistency of our Online delivery service.
• Increase the profitability of areas of our business that have grown the fastest- LABEL and Overseas.
• Enhance website navigation and search functionality to leverage increasing choice on our site.
• Looking to 2023, push the boundaries of our supply base to help mitigate sterling devaluation, through new sources of supply (without compromising our ethics, reliability, quality or design)

Source : Next PLC

Image : Mykolastock / Shutterstock.com

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