Source: Sharecast
The company said it still expected pre-tax earnings of £960m, based on a 2.5% increase in full price sales. Total sales for the year to January 2024 rose 6% to £5.8bn, while pre-tax profit of £918m beat an already upgraded forecast of £915m.
“Our outlook for 2024/25 has changed little since our January Trading Statement. On the face of it, the consumer environment looks more benign than it has for a number of years, albeit there are some significant uncertainties,” the company said on Thursday.
Next added that it did not expect any material adverse impact from stock delays due to attacks on shipping in the Red Sea by Houthi militants backed by Iran that have forced firms to avoid using the Suez Canal.
“On average, transit times have been extended by 7-10 days and our product teams have adjusted the timing of their contract bookings to account for this delay. In addition, higher freight costs have been factored into our prices going forward but we still anticipate that our prices will fall.”
FACTORY GATE COSTS FALLING
Chief executive Simon Wolfson said the slightly brighter outlook was partially due to wages now rising faster than clothing prices. “Selling price inflation in our own products has reversed, mainly as a result of decreasing factory gate prices,” he said.
Next was also selling goods at higher prices as “there appears to be something of a shift back to investment dressing with customers buying somewhat fewer, slightly more expensive items.”
Hargreaves Lansdown analyst Guy Lawson-Johns noted the strong rise in online sales, with revenues from this channel up around 47% compared to 2020.
"It’s no secret Next has worked hard on online service improvements and it’s paying dividends. Better stock availability and excellent operational execution are helping to deliver ahead of expectations," he said.
"Importantly this online growth has been achieved whilst maintaining full-price sales. Unlike peers such as JD Sports, who have had to lean on more promotions to entice punters to part with their cash, Next have stood firm on its pricing."
"Thanks to tight inventory control it carried 14% less surplus stock into online end-of-season sales than the year before. All of this is good news for margins as write-down costs are kept to a minimum and more items are sold at full price. Impressive for a company whose product range has ballooned to include the likes of Nike, Barbour and GANT."
Reporting by Frank Prenesti for Sharecast.com