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Next announces 285% surge in retail growth, online sales fall

Next shares were up 0.7% to 6,132p in early morning trading on Thursday following the fashion group’s Q1 2022 trading update, which reported a giant leap of 285% in retail growth.

Next announced a 21.3% increase in total product full price sales, in line with the company’s guidance for the period, and an 11% decrease in online sales year-on-year.

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The company attributed its slowdown for online retail to the re-emergence of consumers into society after the pandemic lockdowns, leading to its uptick in physical store sales.

Guidance for 2022-2023

The retailer confirmed that it would be maintaining its full year pre-tax profit guidance at £850 million, representing a 3.3% uptick from the previous year, alongside an earnings per share rise of 5% to 557.3p.

“What NEXT haven’t said today is more important than what they have. Markets were concerned that the group would be struggling with costs and availability of product, putting margins under pressure, even before customers struggled with the squeeze on their own incomes”, said Hargreaves Lansdown select fund manager Steve Clayton.

“Instead, the company have reiterated their guidance from March, suggesting that their cost controls are succeeding.”

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Next reported a total online sales growth of 47% across the last three years, and a 21% boost in total product full price sales over the period.

Excluding online sales from Russia and Ukraine following the firm’s closure of its websites in the regions, overseas sales declined 7%, with a reported 60% growth against 2019.

The retail group mentioned expected guidance of 0.8% growth in full price sales throughout Q2-Q4 2022-2023 in the central guidance range, with a lower projection of a 2.9% drop and an upper guidance estimate of 4.6% growth.

“[The] year is unfolding as the group had planned and whilst back in March NEXT management were throwing caveats around like confetti, so great were the uncertainties, come May they are no longer stressing the downside risks,” said Clayton.

Next: Cause for optimism

Next also reported 1.6 million shares repurchased at 6,552p per share under its buyback scheme, amounting to £107.5 million, which reduced the number of shares issued by 1.2% since the group’s financial year close at the end of January 2022.

“The company have continued to buy back shares, spending £107m so far this year, which will help to boost earnings per share growth.”

The fashion group reported a strong slate of results, which should help them survive the cold bite of inflation and lowered consumer shopping as the difficult year ahead threatens to uproot the less essential expenses in the market.

“NEXT’s strength of cash flows leaves them far better placed than most retailers to continue prospering even when times get tough. And they certainly are tough right now,” said Clayton.

“The group’s digital strengths served them well through the pandemic and will help them prosper in the future. NEXT remains the retailer best placed to continue to thrive, both on the high street and online.”

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