Next shares surge as online sales limit pandemic pain

LONDON (Reuters) – British fashion retailer Next soundly beat its forecast for Christmas sales despite COVID-19 lockdowns hitting store sales in November and the final shopping days of December, resulting in another upgrade to underlying profit guidance.

A Christmas window display is seen at Next in Rugby, Britain November 19, 2020. REUTERS/Molly Darlington

Shares in the company rose as much as 9% to a five-year high of 75.22 pounds in early Tuesday trade.

Next, which has seen increased demand for children’s clothes and leisure wear during the pandemic, said full-price sales fell 1.1% in the nine weeks to Dec. 26 on last year, beating its central guidance of an 8% drop given in October.

Chief Executive Simon Wolfson said its online operations had coped with a spike in demand as more than half of the sales that would have been made in store in November migrated online.

“We were surprised that the business did as well as it did despite the November lockdown,” he said in an interview. “Our operations kept up with demand, which was something we were anxious about in October.”

Next, the first major UK listed non-food retailer to update on Christmas trading, nudged up its underlying pretax profit guidance for the year to the end of January to 370 million pounds ($502 million), its fourth upgrade in five months.

However, two one-offs – a 40 million pound provision on the value of store leases and a 12 million pound boost from an additional week of trading – would result in new unadjusted guidance of 342 million pounds, it said.

It anticipated a 14% loss of full-price retail sales in January as a result of a third national lockdown in England. The business said it would also incur costs clearing more of its retail end-of-season sale stock online.

For its 2021/22 financial year, its central scenario which sees disruption in the first half and a recovery in the second, is for sales on a par with its 2019/20 year, and pretax profit of 670 million pounds.

($1 = 0.7358 pounds)

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