Next’s sales jumped by 18% over the past 11 weeks to July 17
Next raised its profit guidance on Wednesday as pent-up demand for its clothes combined with periods of warm weather saw it easily surpass its sales forecast over the previous 11 weeks.
The UK fashion retailer’s sales jumped by 18% over the past 11 weeks to July 17 when compared to the same time period two years ago, before the pandemic.
“Consumers have had the need and means by which to go on a spending spree, and that’s created a tailwind for Next. The retailer has a habit of beating expectations and its latest update is true to form,” says Russ Mould, investment director at AJ Bell.
The FTSE 100 company’s profit before tax for the year to January 2022 could come to £750m according to its central guidance. This represents an increase of £30m.
Total full price sales, including interest income from Next’s credit business, increased by 7.8% in H1, and 18.6% in Q2 to 17 July.
It is a reflection of strong growth in homeware, third party brands and overseas online, which offset deadlines in the store estate.
The Next share price (LON:NXT) rose by 7.82% during the morning session on Wednesday.
Sophie Lund-Yates, Senior Equity Analyst at Hargreaves Lansdown said:
“Customers have clearly missed having reasons to shop, so with restrictions easing, plus unseasonably warm weather, means a spark’s been lit under Next’s sales, and it knocked its targets for six in the second quarter.”
“Don’t forget, consumer wallets are heavier with spare cash than usual too, with a lack of foreign holidays and increased savings during the pandemic, giving them the confidence to go out and splash the cash on new outfits and homeware. This has a positive read across for the rest of the discretionary consumer sector – rather than hoard the spare pennies, it looks like people are happy to spend them,” Lund-Yates added.
“Next has done particularly well, not least because of its great online operation, which has helped offset declines in the physical estate. Next also has a strong presence in out-of-town retail parks which are proving more resilient than town centre locations. That helps keep Next’s popular click and collect proposition thriving too. A stronger digital business should hold Next in better stead should the so-called ping-demic get much worse.”