1st Apr 2021 08:36
(Alliance News) - Next PLC on Thursday raised its forecast, said it met annual profit guidance and "optimistically" ruled out anymore store closures as the UK's vaccine rollout continues.
The clothing and homewares chain also took note of the "battle" its bricks and mortar arm faces as the retail sector's shift to online was accelerated by the Covid-19 pandemic. It also decided against making a final payout but did say it will review its dividend once visibility improves.
Shares in the company were 4.4% higher at 8,214.00 pence each in London on Thursday morning, the best performing blue-chip stock.
Online was the star for Next during the Covid-19-hit financial year, keeping a lid on the FTSE 100 firm's revenue decline. In the year ended January 30, total revenue fell 17% to GBP3.53 billion from GBP4.27 billion. Full price sales were down 15%.
Pretax profit dropped 54% to GBP342.4 million from GBP748.5 million, though it did meet the latest guidance.
Online sales rose 10% to GBP2.37 billion, while retail sales dropped 48% to GBP954.5 million.
"We expect the shift in consumer behaviour towards online sales to continue for some time and one of our priorities during the year has been to continue the development of our online platform. We accelerated part of our planned capital expenditure in the online business, spending GBP121 million on warehousing and systems," Next said.
"There remains a big question mark over the level of sales our stores will achieve when they reopen. The pandemic has served to accelerate a pre-existing social trend - the move to more online shopping. History has been given a shove and, having moved forward, seems unlikely to reverse."
Next added: "The battle to keep our stores relevant in an online world is far from over."
It expects in-store like-for-like sales to fall 20% this year.
"At this level - after reversing out the effects of the current lockdown - our store network would remain marginally profitable," the company added.
On recent trading, Next said that online sales have been much stronger than expected in the first eight weeks of the new year, and are up more than 60% on two years ago. The company bumped up its profit guidance.
"This overachievement plus the expected transfer of sales from retail during the additional two weeks of lockdown, are expected to add GBP30 million of profit. As a result, we are raising our central profit guidance by GBP30 million from GBP670m to GBP700 million," said Next.
"Whether or not there will be further lockdowns this year is impossible to predict. We have, perhaps optimistically, assumed that the rollout of Covid vaccines will result in stores remaining open for the year, once the current lockdown has passed. If this assumption is not correct, it is unlikely we will meet our central guidance for sales and profit."
The end of the third lockdown is two weeks later than the company had initially predicted, though the extension of business rates relief offset this, Next explained.
The retailer proposed no final dividend for the recently ended year, though said it remains committed to returning capital to shareholders in the long term and will review its position later in the year when it has better visibility of trade once stores reopen.
It means it did not pay a dividend during financial 2021, after a 57.5p payout in the prior year. The dividend from financial 2020 was solely in respect to the first half, having decided against a final dividend last year too.
Next's share buyback programme remains suspended too.
Finally, the company noted the success of its Total Platform, which allows brands to use Next's large-scale IT, warehousing and distribution infrastructure for their own e-commerce operations.
"We now have Total Platform contracts in place with five clients: Childsplay Clothing and Laura Ashley which are both now operational, Victoria's Secret UK which we intend to launch in May this year, a fashion startup brand targeted to open in September and Reiss which is planned to launch in February 2022," Next said, adding that the start-up's brand name is currently confidential.
By Eric Cunha; [email protected]
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