There was some good news in the gloomy retail sector this morning as Next PLC announced better than expected Christmas revenues – but warned the sales boost would be “almost entirely” wiped out by the third English lockdown.
As non-essential stores closed their doors in a late Government bid to try and slow the spread of a more transmissible strain of the virus, the Leicestershire-based retailer said in the build up to Christmas sales gained online compensated for almost all of those lost in its bricks and mortar stores.
It said full-price sales over the nine weeks to December 26 fell 1.1 per cent – better than the 8 per cent drop it had been braced for, despite tighter restrictions.
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Shares in the business were up 7.5 per cent on the back of the news at £74.30, suggesting the market’s confidence in its online department and ability to weather the current economic storm.
The FTSE 100, by comparison, was relatively level this morning.
Next said profits were on track to hit £393 million before the latest lockdown announced on Monday, with lost sales in January set to cost it £18 million.
The fashion and homewares chain said it now expects pro-rata 52-week annual profits of £370 million for the year to the end of January, against £365 million previously pencilled in. Profits on a 53-week basis will be hit further by a £40 million property provision and are expected at £342 million.
There were warnings that total full-price sales are set to tumble by 14 per cent in January, which will leave full-year sales 16 per cent lower.
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The business has also taken a £5 million hit from higher costs of switching its end-of-season sale online.
Childrenswear, home, loungewear and sportswear have all done well during the pandemic.
But the business said adult clothing for work, parties, events and going out had, inevitably, slumped.
The group said: “Profit gained from the overperformance in November and December has been almost entirely offset by the anticipated loss of full price retail sales in January due to the lockdown closure of 90 per cent of our stores (and) the additional costs we have incurred clearing more of our retail end-of-season sale stock online.”
Next also cautioned that it was seeing stock delays of up to three weeks due to pandemic disruption on shipments from the Far East, which has left stock levels 10 per cent lower than two years ago.
It expects stock issues to “steadily improve” and return to more normal levels by the end of March.
Next is forecasting profits of £670 million for 2021-22, with sales remaining flat on the pre-pandemic year thanks to an expected recovery in the final six months of the year.
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The trading update revealed that returns rates continued to be much lower than last year – at 21 per cent compared to 36 per cent.
Of the 15 per cent movement, 10 per cent came from an improved product mix and the remaining 5 per cent fall came from customers being more selective when placing orders.
Shoppers buying on credit had also got back to near pre-Covid levels.