Next Sales Meet Expectations, Prices To Rise 5-8% in 2011
Sector: Retail & Leisure
5th August 2010
Clothing retailer Next said first half sales have been in line with expectations as a slow growth in like-for-like retail sales was offset by a better-than-expected performance in Next Directory. Total sales in Retail and Directory were up 3.1%. Growth in retail sales was at the lower end of the guidance of 0.5% to 3.5% at 1.3%, while like-for-likes were up 1.7%. Directory sales jumped 7.8%, compared to the May guidance of 2% to 5% rise. The company said there was a “noticeable cooling in retail demand and the consumers have been in a cautious mood. Next said this would lead to a “more restrained spending” in H2 as spending cuts and tax rises begin to take effect. Guidance for total retail sales is in the range of -1.5% to 1.5%, implying a decline in like for likes from 1.5% to 4.5% with new space expected to add 3% to sales.
Next noted that its reported sales would be 1.5% below actual sales due to this year’s VAT rise. Directory sales are expected to continue growing in the range of 4% to 8%, meaning that the total Next brand sales in H2 will be in the range of 0% to 3% up on last year. Full year pre-tax profits are expected in the range between £535 million to £560 million, representing a year on year increase of 6% to 11%, which is also in line with current market expectations. Capex (Capital Expenditure) for the year is projected to reach to £135 million. Next has also said that its prices would rise in H1 2011 due to a combination of more expensive cotton and a lower dollar costing rate. “We aim to mitigate some of the effects of this with the development of new sources of supply and more rigorous negotiation. However, the combination of increasing cost prices and the January 2011 VAT rise mean that clothing retail prices are likely to rise in Spring 2011. We have yet to purchase the majority of our spring summer ranges, but we estimate that selling prices may rise between 5% and 8%,” Next said in the statement.
Shares in the company declined 7% on the update
Source: Retail Weekly
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