4th May 2023 12:24
(Alliance News) - Next's cautious first-quarter trading update was well received by investors on Thursday, with the clothing and homewares retailer refraining from raising sales guidance despite a better-than-expected showing at the beginning of 2023.
In the 13 weeks to April 29, full price sales including interest income fell 0.7% year-on-year, which was ahead of guidance of a 2% decline. Total product full price sales fell 1.2%, while finance interest income rose 7.4%.
Total trading sales including markdown and clearance rose 1.2%, driven by higher clearance sales.
Believing it to be "too early" to raise its sales guidance for the half or the full year, Next tweaked its sales forecasts for the second quarter to down by 5%, compared to down 4% previously.
"This adjustment seems reasonable, as some of the first quarter's success, particularly in holiday clothing sales leading up to Easter, might have been pulled forward from the second quarter," Next explained.
The second quarter of 2022 also had benefitted from pent-up demand for events such as weddings and proms, Next said.
"The pent-up demand for new outfits to go out again post-pandemic has evaporated, while last year's sunshine burst has been replaced by cloud cover this year, reducing the chances of wardrobe refreshes for the summer," said Hargreaves Lansdown's Susannah Streeter.
Streeter said Next's cautious outlook came as "no surprise", given the ongoing cost of living crisis in the UK.
"The trend for making do, rather than splashing out on expensive new outfits is expected to stay in vogue as budgets are hit by tax hikes and eye-wateringly high food prices," she added.
Next reiterated its full-year outlook, expecting pretax profit to fall 8.7% to GBP795 million and earnings per share to fall 13% to 501.9 pence. It still expects annual sales to be down 1.5% from the previous year.
It also guided for surplus cash of GBP220 million, some of which it intends to return to shareholders, some to invest in platform partners.
Shares in Next were up 2.3% to 6,662.00 pence each in London at midday on Thursday. The stock price is up 9.5% over the past year.
"A rebound over the last six months, partly following optimism over the group's refreshed strategy as announced at its full-year results in March, has lifted the share price to stand ahead...over the last year," ii's Hunter said, noting the stock is outperforming the 3.0% annual gain of the wider FTSE 100.
In March, Next announced a re-organisation, creating a new division to focus on Investments, Acquisitions & Third-Party Brands. With growth prospects "naturally limited by market conditions", Next said it would focus on improving its product ranges and online service levels, as well as managing costs and profit, and laying foundations for future growth.
Last month, Next snapped up vintage clothing brand Cath Kidston for GBP8.5 million. In December, it bought a 74% stake in UK lifestyles retailer Joules for GBP34 million, after snapping up assets of failed furniture seller Made.com for GBP3.4 million.
"The market consensus currently stands at a 'hold', albeit a strong one, but this dearth of any new positive catalysts is unlikely to put any positive pressure on the general view for now," Hunter added.
By Elizabeth Winter, Alliance News senior markets reporter
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.
Related Shares:
Next