Next sees store sales rebound post-lockdown but online star performer

High street stalwart Next has upped its profit targets for the year after recent sales bounced above expectations as the retail sector continues to reshape.

The fashion chain said it reported £75 million more in sales than predicted for the 13 weeks to May 1. Sales for the period were only 1.5 per cent below the same three months in 2019, before the outbreak of the coronavirus pandemic. Next had originally expected a 10 per cent fall.

The sales improvement has led the group to nudge up its profit targets by £20m to £720m for the current financial year.

Next revealed that store sales surged after it began reopening shops across the UK from April 12 in the most recent easing of lockdown restrictions. Scottish stores reopened on April 26 though some outlets had been offering click and collect services.

Next has become one of the most successful and familiar brands on the high street, and also has a fast-growing online operation. Picture: Next plc

It said total full price sales have risen by 19 per cent over the past three weeks as a result.

Sales from retail stores increased by 2 per cent against pre-pandemic levels, but growth was still significantly driven by its online business, which reported a 52 per cent lift.

However, the firm told shareholders that it expects the surge in sales to ease back.

“Evidence from last year suggests that this post lockdown surge will be short lived, and we expect sales to settle back down to our guidance levels within the next few weeks,” the company noted in its trading update.

Next stressed that it was “not the case” that almost all lost store sales were transferred online, with the company buoyed by online sales of Next homeware, third-party brands and childrenswear.

It added: said: “Overall full-price product sales (excluding interest income) were only down 0.6 per cent despite the ten-week closure of our retail stores.

“The number makes it appear as if almost all the sales we lost in stores were simply transferred online.

“This was not the case. In fact, very few of the retail sales lost on adult clothing were recovered online.

“In reality, it was the growth in online sales of Next homeware, third-party brands and Next childrenswear, along with increasing sales overseas, that served to make up for the sales we lost in our stores.”

Steve Clayton, fund manager of the HL Select UK Shares funds, noted: “Forgive the pun, but this is a Nextraordinary result, for Next have trounced expectations by a country mile. Sales were well ahead of consensus, but not for the reasons expected.

“Growth was pretty much entirely from the online business. But it wasn’t a case of clothing sales lost from locked-down stores being recouped online. Instead the growth came from explosive demand for homewares, childrenswear and overseas online demand.”

Richard Lim, chief executive of research consultancy Retail Economics, added: “These are terrific results against an incredibly tough backdrop for the retail sector.

“Despite mass store closures, the business pivoted its proposition towards home furnishings, its overseas presence and third-party labels, while maximising its online advantage.

“As the economy reopens and lockdown restrictions ease, the business is well-positioned to benefit from a considerable amount of pent-up demand.”

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