Shares in clothing and homewares retailer Next (NXT) topped the FTSE 100 leader board in early trading, the shares jumping 4% to £84 after the firm raised its sales and earnings outlook for the year to next April.
In its fulsome first half earnings release, high street stalwart Next recorded an 8.8% increase in brand full-price sales compared with the first half of 2019, which the firm says is a better benchmark than last year’s pandemic-affected first half.
Sales were driven by a 53% increase in the online channel, with physical in-store sales still 38% below 2019’s level. As chief executive Simon Wolfson points out, this is a lot better than his gloomiest projections made at the height of the crisis.
SHOPPERS SURGE
Throughout the period, strong online sales of home and childrenswear helped offset the decline in retail stores. When stores re-opened in April, ‘the bounce-back was far stronger than we anticipated’ said Wolfson.
While he expects the bounce-back to moderate in the months ahead, ‘stepping back from the noise of day-to-day trading, the longer-term outlook appears to be more positive than it has been for many years’ he adds.
As a result, full-price sales for the year to April 2022 are expected to be 10% higher than the 2019 financial year and pre-tax profits are expected to be about £800 million, 7% above 2019 and around 5% above the previous guidance of £764 million.
QUIZ OUT OF FASHION
In stark contrast, shares in fashion brand Quiz (QUIZ) tumbled 20% to 19.5p after the company posted disappointing results for the year to last March.
Quiz, which specializes in evening and ‘occasion’ wear, faced the twin challenges of its stores being shuttered and its customers being stuck in lockdown, meaning they stopped dressing to impress.
As a result, figures for the year to March were deeply unflattering with sales down 66% due to the impact of the pandemic and gross margins down almost 7% to 53.4% as it cut prices to shift stock.
Also, the firm’s liquidity was seriously squeezed, with operating cash flow turning negative to the tune of £2.5 million against a positive £10.2 million the previous year.
Thanks to some nifty footwork, it was able to book a one-off cash gain of £10.4 million on the sale of a subsidiary which subsequently went into administration and a £5.2 million one-off gain on some of its assets.
STORE CLOSURES
The store estate was cut from 75 to 61 in the UK and from seven to four in Ireland, with lower rents and more flexible leases, and the firm is reining in cash spending.
Chief executive Tarak Ramzan is confident sales will pick up as social events return to the calendar, but with consumer confidence having another wobble due to the end of furlough, cuts to universal credit payments and food and fuel shortages, we would question whether occasion wear is really top of peoples’ shopping lists.
