Next profits leap but Ukraine crisis to knock £85 million off sales: reaction

High street stalwart Next has trimmed its sales and profit targets after shutting its operations in Russia and Ukraine.

The London-listed retailer said earlier this month it was winding down its Russian distribution site following the Kremlin's invasion of Ukraine.

Releasing full-year results and a trading update, it confirmed that the closure of websites in both Russia and Ukraine will knock a predicted £85 million off its sales forecasts for the current financial year.

Next added the impact of the war will also pull its profits down by £18m for the year, although this will be partially offset by “better-than-expected” sales in the UK. It downgraded profit targets by £10m as a result.

Next is one of the most familiar names on the UK high street. Picture: Next plc

Nevertheless, the group still expects a 5 per cent increase in sales for the year, while profits are set to rise by 3.3 per cent to £850m.

It comes as the retailer said pre-tax profits jumped 140 per cent to £823m for the year to January, compared with the previous year, with profits 10 per cent above pre-pandemic levels.

Next said this was buoyed by a 12.8 per cent increase in brand full-price sales for the year against pre-pandemic levels.

The firm told investors that UK sales are currently “ahead of where we expected them to be” for the past three months after a strong return back to shops.

It also highlighted a “very sharp reversal” in lockdown fashion trends, as formal clothing recovered and spending on home and casual-focused clothing fell back.

Next chairman Michael Roney said: “We enter 2022 with confidence in the outlook for our business and its ability to continue its successful evolution.

“The effects of the pandemic are ongoing and we remain mindful of macroeconomic and geopolitical risks, but our continued investment over many years in our people and our systems has generated strong and resilient results in the past year and we believe that it will continue to do so,” he added.

Mark Crouch, an analyst at investment platform eToro, said: “Next has ground out some strong numbers in its full-year results. The pandemic has been a disaster for High Street retail, but the firm seems to be showing resilience in the face of this, especially thanks to a strong online presence.

“Profits beat expectations and other key measurements are up versus the year prior to the pandemic beginning. This is a positive indicator because it means the firm isn’t just beating its own performance during a uniquely difficult period, it is beating ‘normal’ times as well.”

Richard Hunter, head of markets at investment firm Interactive Investor, noted: “Next has delivered another set of impressive results despite having one arm tied behind its back by the current economic outlook.

“Next manages market expectations as carefully as it manages its stock levels, often over-delivering on its previous guidance, as evidenced by the five profit upgrades over the last year.”

He added: “The market consensus of the shares remains a buy and is reflective of optimistic prospects for the business in the longer term.”

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