Next has good Q1, but expects slower sales for rest of year
Plenty of UK retailers are issuing updates at the moment that see them reporting lower-than-expected sales and reining-in their expectations for the near future. But Next’s update on Thursday did neither, even though its sales guidance for the rest of the year isn't as buoyant as Q1 has been.
The giant fashion, beauty and homewares retailer said the 13 weeks to April 30 saw full-price sales rising 21.3% on the year, in line with its forecasts.
Next said it’s maintaining its guidance for full-year pre-tax profit of £850 million, which would be up 3.3% versus last year. It expects full-price sales for Q2 to Q4 to be weaker than in Q1 -- anywhere from down 2.9% to up 4.6%, with its guidance on sales for the full-year to range from +2 to +8%.
Of course, full-price sales this time were flattered by the fact that the company’s core UK market was under lockdown in Q1 a year ago. But even so, the fact that Next wasn’t derailed by the tough economic backdrop and other global issues happening this year is impressive.
Looking at its percentages in detail, sales through its retail stores were able to leap because of the easy comparisons against last year's lockdown, while online sales dipped because the boost they received during lockdowns wasn't happening this time. It had planned for online sales in Q1 to be down year on year, but compared to three years ago – that is, the pre-pandemic period – they were up 47%. And overall company three-year growth was 19.5%, or the equivalent of a compound annual growth rate (CAGR) of 6.1%.
Specific full-price sales in the Online Next UK business channel fell 24% year on year (YoY) and rose 23% against three years ago (3YoY). Online Label UK sales (that is, third-party labels) rose 20% YoY and 106% 3YoY. As mentioned, that meant total UK online sales dropped YoY (by 11%), but they rose the aforementioned 47% over three years.
Overseas online sales were down 12% in the latest quarter YoY, but were also up 47% 3YoY. In March, it closed its websites in Ukraine and Russia. Excluding these two countries, overseas full-price sales were down 7% versus last year and up 60% versus three years ago.
It’s significant that these days, Next talks about online sales first as its web sales have been bigger than its store sales for several years.
But its retail store estate is still important. UK and Ireland Retail sales (those through its stores) rose 285% YoY and dipped 8% 3YoY with the company’s sales having gradually moved online due to the wider rise in internet shopping, regardless of the pandemic. Total Retail product full-price sales rose 22% YoY and 21% 3YoY.
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