The UK clothing and homewares retailer Next has lifted its 2021 profit forecast for the second time in two months after strong online sales during the lockdown and a surge in sales since its shops reopened.
Next nudged higher its forecast for full-year pre-tax profit by £20m to £720m. It followed a £30m upgrade to the forecast at the start of April. Shares rose 2% on Thursday morning, making Next the top riser on the FTSE 100.
The retailer smashed its own sales forecast by £75m in the 13 weeks to 1 May, with sales down 1.5% on 2019 – rather than declining by the 10% it had expected. Online sales jumped 63%, as Next became the UK’s biggest internet clothing retailer – ahead of rivals such as Asos and Boohoo.
Sales slipped 0.6% during the 10-week closure of its stores at the start of the year, when England went into its third Covid-19 lockdown. Next said “very few” of the sales lost on adult clothing were recouped online, but strong homeware, third-party brands and childrenswear, along with growing overseas sales, made up for the sales lost in its shops. Business boomed as customers, stuck at home, snapped up comfortable clothes such as jogging bottoms and T-shirts as well as cushions and other home furnishings.
In the last three weeks, when non-essential retailers were allowed to reopen, Next recorded a 19% surge in sales as customers picked up spring and summer clothes – but warned it would not last.
“Evidence from last year suggests that this post lockdown surge will be shortlived, and we expect sales to settle back down to our guidance levels within the next few weeks,” the company said.
Next is expecting sales for the rest of the year to be 3% higher than in 2019, before the pandemic struck. Within this, shop sales are forecast to fall 20% while online is seen 24% higher.
Richard Lim, who runs the consultancy Retail Economics, said: “These are terrific results against an incredibly tough backdrop for the retail sector. Despite mass store closures, the business pivoted its proposition towards home furnishings, its overseas presence and third-party labels, while maximising its online advantage.”
He said Next was benefiting from the vast sums invested in its online operation and its partnerships, for example with Laura Ashley and Homebase.
“As expected, apparel remained under significant pressure as lockdown restrictions and the shift towards home working undermined demand for clothing,” Lim added. “But as the economy reopens and lockdown restrictions ease, the business is well-positioned to benefit from a considerable amount of pent-up demand.”