4th Jan 2024 09:17
(Alliance News) - Next PLC's financial year has followed a familiar pattern, with a series of outlook lifts bumping up initially cautious guidance, and its latest festive period as given its retail peers a tough act to follow.
Next shares were 4.7% higher at 8,462.00 pence each in London on Thursday morning.
"Clothing retailer Next has set the bar high for the rest of the retail sector by posting a strong trading update this morning," Edison analyst Russell Pointon commented.
In the nine weeks to December 30, the clothing and homewares seller's full price sales were 5.7% higher year-on-year, some GBP38 million better than its previous guidance. It had expected growth of 2.0% year-on-year. The period forms part of its fourth quarter, which concludes on January 27.
Sales growth accelerated as Christmas got closer. Full price sales rose 10% in each of the weeks beginning December 17 and December 24.
"Stock has been well controlled. We went into the end-of-season sale with 12% less surplus stock than last year. We expect clearance rates over the life of the sale to be broadly in line with last year," Next said.
The company now expects pretax profit for financial 2024 of GBP905 million, a lift of GBP20 million from its previous outlook, and it would represent a year-on-year increase of 4.0%. Next had initially expected pretax profit of GBP795 million, but it has, now on a number of occasions, lifted its bottom line outlook.
"Of the [latest] GBP20 million increase, GBP17 million came from the sales beat to date and GBP3 million comes from an upgraded forecast for full price sales in January," Next said.
Excluding brand amortisation, it expects pretax profit of GBP914.7 million for the year, a rise of 4.6% from GBP874.7 million.
It expects full price sales of GBP4.78 billion for the year ending later in January, a bump from its November outlook of GBP4.74 billion. It would represent a year-on-year rise of 4.0%.
Looking to the year ending January 2025, the company expects full price sales to increase 2.5% from the expected financial 2024 level. It predicts pretax profit of GBP941.2 million, a rise of 4.0% from the GBP905.0 million expected for the current year.
Excluding brand amortisation, it expects pretax profit for next year to amount to GBP960.0 million, a rise of 5.0% from the GBP914.7 million predicted for this year.
Looking ahead, it believes wages are rising faster than prices, easing some cost-of-living worries for consumers. Next said core inflation in its product range is abating.
Risk factors, however, include the threat of a weakening employment market, mortgage rates and supply chain risks.
Difficulties with access to the Suez Canal may cause delays to stock deliveries if they persist, Next said.
Edison's Pointon added: "The company points to a more benign outlook for the consumer than there has been for a while with better wage growth and zero sales price inflation. However, the company is also alert to the risks from a weakening employment market, higher mortgage rates, and difficulties in the Red Sea which may affect the company's supply chain – not least because some of its product is manufactured in Asia."
By Eric Cunha, Alliance News news editor
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