Sales and pre-tax profits have risen at Next, according to the retailer’s half-year results for the 26 weeks ended 30 July 2022.
The business has reported a “good first half, with overall sales ahead of expectations.” Next says this was driven by the over-performance of its retail stores and a strong performance from the formal parts of its clothing ranges.
Full price sales were up 12.4% versus 2021 and 22.3% against 2019. The company meanwhile posted a profit before tax of £401m, up 16% on 2021 and 22% against 2019.
Following the half year results however, August trading was below the group’s expectations, although sales in September have improved. As a result Next has decided to reduce its forecast for full price sales in the second half from +1% to -1.5% versus last year.
Furthermore, profit guidance for the full year has been reduced from £860m to £840m, which would be a rise of +2.1% on last year.
Charlie Huggins, head of equities at Wealth Club, said: “Next is seen as a bellwether of the UK High Street and today’s cut to full year guidance lays bare the challenges being faced. Asos and Boohoo’s trading performance has been nothing short of dire. Even Primark’s recent trading update called out significant margin pressures. In this context, Next’s half year results are more resilient than most.
“The fact that many retailers are struggling shouldn’t be a surprise. This is arguably the most difficult trading environment since the 2008/09 financial crisis. Inflation is at levels not seen for four decades. Sterling is in the doldrums, trading at its weakest level against the dollar since 1985. Add to this, the war in Ukraine and the spectre of further interest rate rises. It’s not exactly conducive to consumers restocking their wardrobes.
“Perhaps the biggest issue for the whole sector is that while things look challenging right now, they look set to become even more so. This is due to the precipitous decline in sterling which will only exacerbate inflationary pressures.
“Next looks better positioned than most of its peers to weather the storm, and emerge stronger in light of its high margins, robust cash flows and strong balance sheet. But 2023 could be a very difficult year the way things are shaping up.”
