The second quarter sales of retailer Next Plc has gone up 5 percent compared to last year, £50 million ahead of the previous guidance. Sales in the first half of the year have been dominated and 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 formal wear returned to favor. As anticipated, online returns rates and surplus stock also reverted to pre-lockdown levels.
The stronger than expected sales performance in the second quarter is not expected to continue into the second half and the company is maintaining its sales guidance for the remainder of the year at +1 percent.
Besides that, the caution stems from two factors, it believes that an unusually warm summer boosted sales in the first half and the company does not expect a similar weather windfall in the second half; and the impact of inflation on consumer spending is likely to worsen in the second half.
In part, the retailer believes 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.
At first sight, the company’s full price sales performance against last year suggests that growth online has ground to a halt and that retail is having something of a renaissance.
This is certainly the case on a one year basis. Last year, the stores were closed for most of the first quarter. Even when they reopened, the company believed that many customers remained wary of visiting shops.
During this time, the company thought online shopping was inflated by at least as much as retail sales were depressed.
According to a report We expect Next finance profit to be in line with the guidance of £160 million previously issued in March and for our customer receivables balance to close the year at £1.28 billion, which would be up +10 per cent versus last year and ahead of pre-COVID levels.