1st Nov 2023 16:58
(Alliance News) - Next PLC defied the uncertain mood in the retail sector and lifted annual guidance.
Tumbling consumer confidence, inflation and weather proving unseasonably warm or disappointingly cold has hurt many a retailer. FTSE 100-listed Next appears to be shrugging these worries aside.
The Leicester, England-based clothing, footwear and home products retailer had previously forecasted a pretax profit of GBP875 million for the financial year ending in January 2024. Pretax profit for financial 2023 was GBP870.4 million.
This comes after Next said sales in the three months ended October 28 grew 4.0% from a year ago, GBP23 million ahead of its guidance which was originally set to be an increase of 2.0%. This was mainly driven by sales growth in its Online division of 6.5%.
Next also expects to report higher pretax earnings per share of 730.2 pence, up 4.1% from a year ago. Previous guidance was set to GBP723.9p.
AJ Bell analyst Russ Mould commented: "It's been a turbulent year for retailers thanks to consumers battling high interest rates and, more recently, unusual weather patterns which meant the wrong kind of clothes were on the shelves. For example, t-shirts and summer dresses were less appealing during the cooler than average August, and then retailers' winter range gathered dust during a warmer than average September. Nonetheless, Next has managed to navigate through the challenges and once again has upgraded earnings guidance. Rival retailers will certainly want to know how it has managed to stay above water.
"The latest success can be attributed to online sales, suggesting Next continues to stock what people want and at price point that shoppers deem to be good value for money."
Mould added: "Sales have really improved since the weather normalised in mid-October, with temperatures dropping no doubt being the catalyst for people to reach for their phones or laptops to order a new jumper, coat or pair of gloves. The key challenge for Next is to try and maintain recent sales momentum."
While Next shone, Asos PLC's woes continued.
Asos said in that in the financial year that ended September 3, its pretax loss widened to GBP296.7 million from GBP31.9 million the year before, as revenue fell 10% to GBP3.55 billion from GBP3.95 billion.
Edison analyst Russell Pointon commented: "FY24 looks like another challenging year for ASOS with management guiding to a further sales decline of 5-15%, which looks to be well below the company-complied consensus, and 'positive' adjusted Ebitda before they expect a return to revenue growth and a return to pre-pandemic levels of profitability, an Ebitda margin of 6%.
"Operating in a highly competitive industry, Asos' success hinges on adapting to changing consumer preferences and market conditions. The share price decline over the year suggests investors may have factored in some of the current challenges."
By Eric Cunha, Alliance News news editor
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