TIDMNXT
RNS Number : 8502U
Next PLC
04 August 2022
NEXT PLC
Trading Statement - 4 August 2022
OVERVIEW
Sales in the first half of the year have been dominated by a
sharp reversal of last year's lockdown trends. Sales in Retail
stores recovered, while Online growth appears to have reverted back
to its longer term trajectory. Many product trends have also
returned to pre-pandemic norms. Lockdown winners such as Home and
sportswear retreated, while formalwear returned to favour. As
anticipated, Online returns rates and surplus stock also reverted
to pre-lockdown levels.
HEADLINES
-- Q2 full price sales (1) up +5.0% (2) versus last year, GBP50m
ahead of our previous guidance.
-- Full price sales guidance for the second half maintained at +1.0%.
-- Full year profit guidance increased by +GBP10m to GBP860m (+4.5% versus last year).
-- Earnings Per Share (EPS) guidance increased to +7.2% versus last year.
(1) Full price sales are total sales excluding VAT, less items
sold in our Sale events, Clearance operations and Total
Platform.
(2) Full price sales against last year, excluding Russia and
Ukraine, were up +6.3%.
FULL PRICE SALES PERFORMANCE
Full price sales in the quarter were +4.7% stronger than we
expected. In part, we believe this over-performance has been the
result of unusually warm and dry weather in June and July. A marked
return to formal dressing, perhaps driven by pent up demand for
social events (weddings etc.), has also played to the strengths of
the NEXT brand.
Retail and Online Sales Trends
At first sight, our full price sales performance against last
year suggests that (1) growth Online has ground to a halt and that
(2) Retail is having something of a renaissance. This is certainly
the case on a one year basis. But we think that these changes
reflect a short term reversal of pandemic trends, and are unlikely
to be indicative of longer term trends in consumer behaviour.
Last year, our stores were closed for most of the first quarter.
Even when they reopened we believe that many customers remained
wary of visiting shops. During this time we think Online shopping
was inflated by at least as much as Retail sales were depressed.
The charts below show the sales performance of our Online and
Retail businesses against one year (red line) and the compound
annual growth rate (CAGR) against the last pre-pandemic year, three
years ago (blue line). The three year CAGR is much more consistent
than the growth against last year and, we believe, gives a clearer
picture of long term consumer trends.
Click or paste the following link into your web browser to view
the charts titled 'Online Full Price Sales Performance by Month'
and 'Retail Full Price Sales Performance by Month'. Refer to page 1
for these charts.
http://www.rns-pdf.londonstockexchange.com/rns/8502U_1-2022-8-3.pdf
Quarterly Sales by Business
A more detailed breakdown of our sales performance by business
division is given in the tables below for the first and second
quarter. The first table shows the comparison against last year and
the second against three years ago.
One Year Comparison Versus 2021/22
Full price sales (VAT exclusive)
by division Q1 to 30 April Q2 to 30 July
================================= ============== =============
Online - 11.1% +0.2%
Retail +284.5% +12.0%
============== =============
Total Product full price sales +22.1% +4.5%
Finance interest income +11.4% +13.0%
============== =============
Total full price sales including
interest income +21.3% +5.0%
Three Year Comparison Versus 2019/20
Full price sales (VAT exclusive)
by division Q1 to 30 April Q2 to 30 July
================================= ============== =============
Online +47.0% +44.4%
Retail - 8.2% +4.7%
============== =============
Total Product full price sales +21.3% +25.5%
Finance interest income - 2.2% +2.4%
============== =============
Total full price sales including
interest income +19.5% +23.8%
A Resurgence in Retail?
During Q2, Retail's full price sales performance has been much
better than we had anticipated and up (+4.7%) against three years
ago. We had planned that our stores would be down against 2019,
following the long run of negative like-for-like retail sales we
have experienced since 2016.
We suspect that the apparent improvement in the fortunes of our
stores is, to some extent, down to the number of competing stores
that have closed in the last three years. This is supported by ONS
industry statistics (3) for February to June which suggest that the
total money spent on clothing in all UK retail stores is down -6%
compared to three years ago.
(3) Two ONS datasets are used: (1) total retail spend on
clothing in the UK and (2) the percentage of sales achieved online.
Combining these two provides the total spend in physical shops.
Data sources: (1) Retail sales pound data VaINSAT, 22 July 2022 and
(2) Retail Sales Index internet sales ISCPNSA3, 22 July 2022.
Longer Term Online Growth Rates
In the first half, the CAGR of our Online business over the last
three years is very similar to the CAGR experienced in the three
year period pre-COVID, as shown in the table below. Of course,
these numbers do not imply Online sales will continue to grow at
+13.4%, but they do demonstrate that our current Online sales
growth is not as unusual as it first appears.
Three years Three years pre-COVID
July 2019 - 2016/17 - 2019/20
July 2022
(Six months) (Full year)
=============================== =============== ======================
Online compound annual growth
in sales +13.4% +12.6%
=============== ======================
ONLINE RETURNS RATES - BACK TO PRE-COVID LEVELS
As anticipated, returns rates have reverted and are currently
close to pre-pandemic levels at 42%. This follows two years of
exceptionally low returns rates during the pandemic. The low
returns rates during the pandemic were mainly driven by product
mix, with sales of low returning categories such as Home,
childrenswear and sportswear far exceeding their normal levels.
Click or paste the following link into your web browser to view
the chart titled 'Online Full Price Returns Rates Five Year View'.
Refer to page 3 for this chart.
http://www.rns-pdf.londonstockexchange.com/rns/8502U_1-2022-8-3.pdf
OF SEASON SALE
Stock Going into the Sale
Last year, our stock for Sale was exceptionally low mainly as a
result of industry wide stock shortages. So this year Sale stock
was +30% up on last year. However, against three years ago, Sale
stock grew by +25%, broadly in line with the growth in full price
sales over that period (as set out in the table below). Once again,
it is last year's figure which is unusual, with this year's surplus
returning to more normal levels.
H1 full price
product sales H1
(exc. interest surplus Difference
income) stock in growth
========================== =============== ======== ==========
Growth versus last year
(2021/22) +12% +30% +18%
Growth versus three years
(2019/20) +23% +25% +2%
Clearance Rates
To date, our clearance rates have been below our expectations.
As mentioned earlier, warmer weather has been very helpful for full
price sales during the quarter. However, the particularly hot
weather experienced on the first two days of our Sale encouraged
customers to stay away from shops and particularly hampered
clearance of heavier weight products. The additional cost of the
lower clearance rates is reflected in our revised central profit
guidance and has been more than offset by the benefit of better
full price sales.
NEXT FINANCE
We expect NEXT Finance profit to be in line with the guidance of
GBP160m previously issued in March and for our customer receivables
balance to close the year at GBP1.28bn, which would be up +10%
versus last year and ahead of pre-COVID levels. As set out in the
table below, defaults show a marginal deterioration against last
year but are still materially better than pre-COVID levels.
July 2022 July 2021 July 2020 July 2019
======================================== ========= ========= ========= =========
Defaults as a % of customer receivables
balance 1.7% 1.6% 1.9% 2.0%
GUIDANCE FOR FULL PRICE SALES, PROFIT AND EPS
New Central Guidance
The GBP10m increase in our central guidance for profit before
tax is explained in the table below. GBP15m of additional profit
has come from better than expected full price sales in the first
half. Retail sales were a larger percentage of our total full price
sales in the quarter, which improved margin by +GBP6m, and we are
expecting a similar gain in the second half. These increases have
been partially offset by additional costs as set out in the table
below.
Previous profit before tax guidance (GBPm) 850
========================================================== === ====
Q2 full price sales beats +15
Q2 increase in participation of Retail sales +6
H2 expected increase in participation of Retail sales +8
========================================================== === ====
Total increases in guidance profit +29
Lower clearance rates of surplus stock - 6
Higher logistics costs (mainly fuel) - 6
Higher Technology costs (mainly acceleration of developer
recruitment) - 4
Staff incentives / other - 3
========================================================== === ====
Total increase in guidance costs - 19
========================================================== === ====
Revised profit before tax guidance 860
Guidance Range
The stronger than expected sales performance in Q2 is not
expected to continue into the second half and we are maintaining
our sales guidance for the remainder of the year at +1%. Our
caution stems from two factors, we believe that: (1) an unusually
warm summer boosted sales in the first half and we do not expect a
similar weather windfall in the second half; and (2) the impact of
inflation on consumer spending is likely to worsen in the second
half. Our latest full price sales and profit guidance ranges for
the full year are set out in the table below.
Previous
Central central
Guidance for 2022/23 Lower guidance Upper guidance
================================== ======= ========= ======= =========
H1 full price sales versus
2021/22 (actual) +12.4% +12.4% +12.4% -
H2 full price sales versus
2021/22 - 3.0% +1.0% +5.0% -
======= ========= ======= =========
Full year full price sales
versus 2021/22 +4.0% +6.2% +8.4% +5.0%
Profit before tax GBP820m GBP860m GBP890m GBP850m
Profit before tax versus 2021/22 - 0.4% +4.5% +8.1% +3.3%
Earnings Per Share 543.3p 569.1p 588.5p 557.3p
Earnings Per Share versus 2021/22 +2.3% +7.2% +10.9% +5.0%
======= ========= ======= =========
SHARE BUYBACKS
So far, in this financial year, we have spent GBP224m on share
buybacks at an average price paid per share of GBP63.85, which
equates to 3.5m shares. This reduces the number of shares in issue
by 2.6%. If profits are in line with our guidance of GBP860m, then
the Equivalent Rate of Return (4) (ERR) on these buybacks will be
10.6%.
(4) Equivalent rate of return (ERR) is calculated by dividing
the anticipated pre-tax profits by the market capitalisation at the
start of the financial year (January 2022). NB - Market
capitalisation is calculated based on the shares in circulation, so
excludes shares in the NEXT Employee Share Option Trust.
INTERIM RESULTS
We are scheduled to announce our results for the first half of
the year on Thursday 29 September 2022.
Forward Looking Statements
Certain statements in this Trading Update are forward looking
statements. These statements may contain the words "anticipate",
"believe", "intend", "aim", "expects", "will", or words of similar
meaning. By their nature, forward looking statements involve risks,
uncertainties or assumptions that could cause actual results or
events to differ materially from those expressed or implied by
those statements. As such, undue reliance should not be placed on
forward looking statements. Except as required by applicable law or
regulation, NEXT plc disclaims any obligation or undertaking to
update these statements to reflect events occurring after the date
these statements were published.
Date: Embargoed until 07:00 hrs, Thursday
4 August 2022
Contacts: Amanda James, Group Finance Director Tel: 0333 777
(analyst calls) 8888
Alistair Mackinnon-Musson, Rowbell Tel: 020 7717
PR 5239
Photographs: https://www.nextplc.co.uk/media/image-gallery/campaign-images
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
TSTVXLFBLVLZBBD
(END) Dow Jones Newswires
August 04, 2022 02:00 ET (06:00 GMT)
Grafico Azioni Next (LSE:NXT)
Storico
Da Mar 2024 a Apr 2024
Grafico Azioni Next (LSE:NXT)
Storico
Da Apr 2023 a Apr 2024
