Next expects to remain in profit as sales partially recover
Next has said it now expects to remain in profit this year after reporting a 28% sales decline in the second quarter, much better than the fashion and homewares retailer’s best projection at the height of the coronavirus crisis in April.
The business has upgraded its annual profit guidance to an expected £195m this year and said that even in a worst-case scenario, where the high street is hit by a second lockdown, it will still manage a £15m profit. The retailer, which made almost £600m in profits last year, said in April it could post losses of up to £150m this year.
“Our experience over the last 13 weeks has given us much greater clarity on our online capabilities during lockdown and the state of consumer demand, and we are now more optimistic about the outlook for the full year than we were at the height of the pandemic,” Next said.
Full-price sales fell by 28% in the three months to 25 July, while online purchases rose 9% as the company said warehouse capacity had retuned to normal levels faster than planned.
Next said sales of childrenswear, home, nightwear and sportswear, and some adult casual clothing, had sold much better than formal clothing related to work, going out, overseas holidays and large social events.
The company said sales were down 32% since it reopened its retail stores on 15 June.
“As a general rule, our out-of-town retail parks have significantly outperformed shopping centres and high street locations,” the company said.
Next warned that its guidance of a “central” scenario of £195m profits could not be guaranteed given the uncertainty surrounding the coronavirus. “The duration of social distancing rules, post-lockdown consumer behaviour, earnings, unemployment and, most importantly, whether there will be a second wave lockdown, all remain unknowable,” it said.
Earlier this month the retailer moved to buy the UK arm of the lingerie brand Victoria’s Secret, which fell into administration last month.
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