The fashion retailer Next upgraded its full-year profit guidance for the second time in as many months on Wednesday after quarterly full-price sales rose by a better-than-expected 2.8%, although it is cautious on Christmas trading.
The company raised its pre-tax profit guidance by £65m to £365m, though it expects fourth-quarter sales to be 8% lower than a year ago because of the impact of the coronavirus pandemic on the high street and pressures on online capacity.
“We think it is unlikely that sales in the fourth quarter will be as strong as the third quarter,” the company’s chief executive, Simon Wolfson, said.
“As we begin to get into Christmas, even in the better case we will begin to run into some capacity constraints, both in retail, where people will avoid very busy shops, and also online, where we may hit capacity constraints in our warehouses.”
The best-case scenario was for flat sales in the final quarter, with stock levels limiting any further upside, he said.
Even after the upgrade, profit this year will be half the level of 2019-20, when Next made £728m. It forecast in June that profits would collapse to £195m having said in April that it could post losses of up to £150m for the year.
Shares in Next, which fell to a seven-year low of £33.11 in March, were up 1% at £61.50 in early trading.
The retailer said the biggest risk was whether England, Scotland and Northern Ireland would follow the decision by Wales to shut non-essential retail shops as part of tougher short-term lockdown measures.
A widespread two-week lockdown would reduce retail full-price sales by about £57m, it said.
Online sales were strong in the quarter, the company said, rising 23.1% to offset a 17.9% drop in retail.
Home and children’s wear continued to perform well, while demand for men’s and women’s formal and occasion clothing remained weak.