Resilient lockdown results bodes well for Next’s post-pandemic performance, says GlobalData

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Following today’s release of Next figures for the 13 weeks ending 1 May 2021, Jonathan Rock, associate retail analyst at GlobalData, a leading data and analytics company, offers his view: “Next outperformed its Q1 sales forecast by £75m, driven by a 19% increase in total full price sales in the last three weeks of the period after its stores reopened. Consequently, it has raised its central guidance for full year profit before tax by £20m to £720m – now down just 1.2% on FY 2019/20 profit.

“Sales in the three weeks following the easing of restrictions on April 12th saw l-f-l sales in retail stores grow 2% and online sales rise 52% compared to Q1 2019. The maintenance of strong online growth reflects well on Next as online customers didn’t simply transfer back to in-store competitors. The longevity of this recovery in offline sales remains to be seen, with Next themselves noting that pent up demand in those three weeks is “very unlikely to be indicative of demand for the rest of the year”. Despite this, the strong online performance following restrictions easing – which grew further in the last week of the period – is reason enough to be optimistic, indicating new online-focused shoppers have been acquired over lockdown.

“The retail giant noted that sales were not evenly transferred to online in Q1 sector-by-sector, with UK NEXT-branded adult clothing sales dropping -46% (-£150m) as “very few” sales in this category were recovered online. Balancing this was a 2% growth in UK NEXT-branded Childrenswear (+£3m) and 12% growth in Home sales (+£17m), plus an exceptional 67% growth in both UK LABEL third-party brands (+£64m) and overseas online sales (+£77m).

“The notable performance from third-party brands reflects well on previous acquisitions such as Victoria’s Secret, Reiss, and Laura Ashley, which have allowed Next to bolster its appeal to a variety of demographics. Its recent partnership with Homebase, adding gardening centres to six Next stores, will only continue to expand Next’s influence in another market it is less prominent in.

“Growth in online sales overseas (£77m) was more than quadruple the -100% (-£16m) loss in overseas retail sales, helping mitigate the 9% decrease in total UK full price sales for the period. Next should capitalise on the exceptional resilience to lockdown-enforced store closures abroad this online growth abroad provides. Its strong online presence will protect it from the possibility of longer lockdowns across Europe, which can be wielded to steal market share from continental store-based rivals with less developed online offers.

“Next’s resilient performance in a quarter scarred by 10 weeks of lockdown left investors optimistic, with its share price rising 2.8% in early trading this morning.”

Richard Lim, CEO, Retail Economics, said: “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. 

“The retailer is benefiting from the vast sums invested in their online operation and the well-established partnership approach which pre-empted where the industry was heading. 

“As expected, apparel remained under significant pressure as lockdown restrictions and the shift towards home working undermined demand for clothing. But as the economy reopens and lockdown restrictions ease, the business is well-positioned to benefit from a considerable amount of pent-up demand.”