29th Sep 2021 08:46
(Alliance News) - Clothing and homewares retailer Next on Wednesday raised its profit guidance and promised shareholders a special dividend early next year.
For the six months to July 31, revenue was GBP2.12 billion, up 5.2% from GBP2.01 billion at the same time in 2019, and pretax profit was GBP346.7 million, up 5.9% from GBP327.4 million. Compared to last year, Next swung to a pretax profit from a loss of GBP16.5 million.
Next explained it is providing direct comparisons against the relative period two years ago as disruption to last year from Covid meant that "one year comparisons are generally not meaningful".
The retailer said full price sales in the past eight weeks were up 20% versus 2019, "materially exceeding" expectations. This was higher than with its previous guidance for the second half of its financial year of 6%.
However, the business did warn of "some degradation" in service caused by potential labour shortages in the run up to Christmas if the UK government did not relax some immigration rules.
Next highlighted that it was not currently experiencing difficulties in recruiting, although urged the government to take action to avoid future problems: "The HGV crisis was foreseen, and widely predicted for many months. For the sake of the wider UK economy, we hope that the government will take a more decisive approach to the looming skills crisis in warehouses, restaurants, hotels, care homes, and many seasonal industries."
Turning to shareholder payouts, Next did not declare an interim dividend as with the previous year. However, it said that it remained committed to its long-term policy of returning surplus cash.
"It is our intention to distribute any remaining surplus cash generated this year as a second special dividend at the end of January 2022. Any further dividends will be announced in our Christmas trading statement on Thursday 6 January 2022. We currently plan to return to ordinary dividends in the year to January 2023," it said.
Looking ahead, Next said it is increasing its full price sales guidance for the year ending January 2022, to be up 10% against 2019. The company added that the longer-term outlook "appears to be more positive than it has been for many years".
Next said it now expects a pretax profit for the full year of GBP800 million, up 6.9% versus 2019 and GBP36 million ahead of its previous guidance. The forecast for earnings per share was increased to 516.9 pence, up from 494.1p prior guidance and 9% higher compared to two years ago.
Shares were up 2.8% at 8,304.00 pence in Wednesday early trading. They are up 17% so far in 2021.
"Historically Next has had the habit of cautious projections being followed by far superior results, and these numbers are no exception," commented Richard Hunter, head of Markets at interactive investor.
"Next is a tightly run ship which is able to respond to a fluid trading environment both in terms of evolving fashion trends as well as financial challenges," Hunter added. "The company is not only exceeding pre-pandemic levels of trading, but has also demonstrated that the measures it has taken in the interim leave it strongly placed to benefit from the new environment."
By Will Paige; [email protected]
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