Next resilience through pandemic prompts profits optimism

Next reported a 97% plunge in pre-tax profits in its first half to just £9m, but has upped guidance for the full year from £195m expected in July to £300m. 

Full-price sales fell 33% in the six months to July. However, in the past seven weeks they have risen 4% and full-price sales for the rest of the year are expected to be down 12%.

Next’s onine sales slipped 14% to £863m in the period, while store sales were down 61% to £345m. 

Next chief executive Lord Wolfson said: “The sales performance through the pandemic has been more resilient than we expected. The scale of our online business, in the UK and overseas, the breadth of our product offer, and the fact that much of our store portfolio is located out of town, have served to mitigate the worst effects of the pandemic on trade.”

As well as its online and retail park presence, he said that Next benefited from the breadth of its offer including childrenswear, loungewear and sportswear “which have done relatively well during the pandemic”.

Next continued to develop new business areas, such as launching its Total Platform service, covering everything from website systems to distribution for other businesses. The first site was launched for Childsplay Clothing. Next has also agreed terms with L Brands to establish a joint venture selling the Victoria’s Secret and Pink products under licence in the UK Republic of Ireland.  

Wolfson said: “Standing as we are, in the midst of the pandemic, with no sign yet of abatement or vaccine, it might seem odd that the essential tone of this report is optimistic. Particularly, some might say, coming from Next.

“But our confidence in the future is not because we see a comfortable route through to the end of the pandemic. The prospects for the next six months remain as uncertain as the outlook for the virus itself; never has our guidance been more tentative or as broad in its possible outcomes. 

“But in all our guidance scenarios the group generates a profit, generates cash and reduces its debts. So we can look to the end of this extraordinary time – whenever that may be – in the belief that we can build on the strength of the Next brand, its people and its infrastructure along with all the new opportunities those assets might deliver.”