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Next rules out further closures this year, upgrades full-year guidance

Next PLC (LON:NXT) said it “perhaps optimistically” assumes the vaccine rollout will result in stores remaining open for the year, once the current lockdown has passed.

The retailer based its central guidance for sales and profit on shops continuing to trade without interruption and revised it upwards following strong performance recently.

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It also said the consumer economy “will be healthier than many presume” in the short term, due to pent-up demand and an increase in personal savings.

Nonetheless, like-for-like sales are expected to drop 20% this year after COVID-19 accelerated the shift to online shopping.

In the central scenario, total sales are expected to come in at around £4.3bn, in line with the year ended in January 2020, with profit before tax of £700mln compared to £729mln two years ago.

The FTSE 100 firm said this guidance will imply the loss of over £500mln of sales from Retail stores and building that turnover back across the Online businesses.

In the first eight weeks of the year, Online sales have been stronger than expected and climbed over 60% on two years ago. 

This outperformance, plus the expected transfer of sales from Retail during the additional two weeks of lockdown, are expected to add £30mln of profit to the full-year results.

The anticipated end of the third lockdown in April is two weeks later than Next had allowed for in its previous guidance, but the profit lost from those additional two weeks has been offset by the extension of business rates relief announced in March.

In the year to 30 January 2021, total sales slipped 17% to £3.6bn, with online up 10% and retail down 48%. Profit before tax tumbled 53% to £342mln because of the poor performance in stores.

Next made additional stock provisions and write-offs of £34mln, having taken a provision for Spring/Summer 2020 stock that was hibernated until 2021, made additional provisions against clearance stock carried over into this year and written off 30% of the value of the fabric purchased for orders that were later cancelled.

As it happened last year, the clothier did not propose a dividend.

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