While reporting better than expected first quarter trading, the British fashion retailer Next increased its profit guidance for the full year for the second time in a span of two months.
The central guidance for its pretax profit in the 2021-2022 fiscal year was raised by it to 720 million pounds ($1 billion) compared to its previously announced target of 700 million pounds that it had been made in April by the retailing group which trades from about 500 stores as well as online.
This announcement was made by the company even after full price sales in the 13 weeks to May 1 dropped by 1.5 per cent compared to the same period two years ago which was prior to the Covid-19 pandemic has started to hit its businesses last year.
The previous guidance for the full year was made by Next based on its assumption that there would be a 10 per cent year on year drop in the sales of the company for the first quarter of the current year. The company said that it had managed to beat its own previous forecast for the first quarter by 75 million pounds.
But the group refrained from raising its sales guidance for the rest of the year and geld the forecast at 3 per cent for the year compared to the value two years ago prior to the pandemic hit.
The company had benefited from its online operations which it had established a long time ago which helped it to comfortably tide over the health crisis period.
Large drops in sale during the pandemic have been reported by rival companies that have weak or no infrastructure for online business such as Primark. And other rivals such as Topshop-owner Arcadia, and Debenhams have gone out of business altogether because of the pandemic hit.
Compared to the first quarter two years ago, there was a 76 per cent drop in the retail sales from its stores for the first quarter, Next said, which reflected the impact of the lockdowns imposed to curb the spread of coronavirus infections. In the same period, the company also recorded a 65 per cent growth in its online business.
There was a 19 per cent growth in total full price sales in the last three weeks which indicated the positive impact on its store business because of the easing of the pandemic restrictions.
“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,” it said.
Over the past one year, the stocks of Next are up by 77 per cent and the current valuation of the company based on its share price was at 10.8 billion pounds.
(Adapted from Nasdaq.com)