Next delivers again with Q1 sales growth above guidance

Next is often referred to as a bellwether of the UK high street. Its brand is embedded in the national psyche and associated with high-quality yet affordable clothing and homeware.

This brand appeal has seen it through challenges such as the shift to online shopping – when it was arguably a little slow to adopt online channels – and the recent pandemic. Many of its peers have gone into administration while Next repositioned its business and maintained sales growth.

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Today’s Q1 trading update is another example of Next’s prowess. Sales rose 5.7% in the quarter, slightly above guidance, as online sales surged 8%, but retail remained dead flat.

“Next’s first-quarter results came in slightly above group expectations, beating its full-price sales guidance by 0.7 percentage points. These sales were driven by an 8.8% growth in its Online channel, with Retail remaining flat,” said Guy Lawson-Johns, equity analyst, Hargreaves Lansdown.

“Online revenues continue to drive outperformance. Next’s significant work to enhance its online service is paying dividends. Improved stock availability and seamless operational execution are driving performance beyond anticipated levels.”

Stalling retail sales growth may be why shares are down slightly today. Next shares, however, are up 11% year to date.

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There may also be a smidgen of disappointment that sales growth wasn’t better. Notwithstanding the economic challenges Next is operating in, investors have become accustomed to strong results, which have become the norm over the past two years. 

“They have been cautious about raising the full-year outlook due to a particularly warm Q2 last year and as a result anticipate a potential dip upcoming in comparison,” said Adam Vettese, analyst at eToro.

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