3rd Nov 2021 08:29
(Alliance News) - Next PLC on Wednesday left its annual profit outlook unchanged and warned a recent surge in full price sales will ebb as pent-up demand wanes, with the UK consumer facing accelerating costs of essential goods.
The retailer's update on Wednesday was somewhat of a mixed bag, as sales progress was offset by rising costs and a tough outlook.
In the third quarter to October 30, Next said full price sales, including interest income, rose 17% from pre-virus levels. They were down 13% year-on-year, however.
In the last five weeks alone, full price sales climbed 14% on two years earlier, beating its own forecast of 10% growth.
The company edged up its annual full price sales outlook to growth of 11% on a two years basis, topping the previous 10.7% forecast.
It has left fourth quarter guidance unchanged at 10.2%, however, as Next expects recent gains to fade.
"We do not expect sales to continue at the level seen in Q3," it cautioned.
Next noted pent-up demand is "likely to continue to diminish", while supply chain challenges mean stock availability is an issue. In addition, consumers face rising costs from elsewhere, potentially limiting their spending in high street stores.
"Although consumer finances are in good shape, price increases in essential goods (such as fuel) may moderate demand for more discretionary purchases," Next warned.
Recently, gas prices have surged, leading to a spike in energy bills.
Next also left profit guidance unchanged. Although a recent GBP14 million full price sales outperformance generated around GBP4 million in profit, the retailer expects this to be offset by digital marketing, inbound air freight costs and online distribution expenses.
It still expects pretax profit guidance of GBP800 million, which would be up 6.9% on two years prior. Pretax profit in the year ended January 2021 amounted to GBP342 million.
Next shares were 3.0% lower at 8,066.00 pence each in London on Wednesday morning, among the worst blue-chip performers.
By Eric Cunha; [email protected]
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