Next raises guidance as sales rise in SS19, online is strongest

By

Sandra Halliday

Published
Jul 31, 2019

Fashion retailer trading statements tend to make for depressing reading at the moment, so when Next released one on Wednesday morning, there was that moment of wondering whether it would be bad news.

In the event, it was quite the opposite with the company reporting higher full-price sales and raising its guidance, which isn't something we see happening very often in the current fashion retail environment.

The company said full-price sales in the 26 weeks to July 27 (H1) rose 4.3% year-on-year with Q2 up 4%. As a result, annual full-price sales guidance has been increased from a rise of 1.7% to  a rise of 3.6%. And its full-year profit guidance has been upped by £10 million to £725 million, which is a 0.3% increase year-on-year.

Back with the first half, as well as that full-price sales rise, the company said that total sales including markdowns rose 3.8%. As expected, it was the group’s online operations that were strongest. In H1, full-price Online division sales rose 11.9% while Retail (that is, its physical shops) dropped 3.9%. And that shift online seemed to accelerate during the half with the retail drop in Q1 being 3.6%, widening to a fall of 4.2% in Q2. By contrast, online sales were up 11.8% in Q1 and 12% in Q2.

The company has seen an ongoing decline in its shops but remains committed to physical stores as they’re key to supporting its e-store and still generate plenty of sales on their own.

Despite the second quarter being slightly slower than the first overall, the company said full-price sales during the later period were better than expected. Unlike some of its rivals, the month of May looked strong and July was also healthy with a 6.8% increase.

“However, some of July's over-performance in full price sales came as a result of lower markdown sales in our end-of-season Sale,” it said. “We believe that the sales performance in May/June is a better guide to underlying growth.”

The company went into the end-of-season Sale on July 6, with surplus stock down 1% on last year and clearance rates to date (that is, the percentage of Sale items that have been sold) are 2% lower than expected.

Following the better than anticipated sales performance in the second quarter, it’s increasing its full-price sales guidance for the second half from +1.7% to +3%, in line with the growth in May and June.