Next’s sales beat its expectations by £75m in the opening months of its financial year, as online growth almost made up for store closures. It now expects full-year pre-tax profits to be £20m higher than previous expectations. The retailer says its online growth does not represent its store sales transferring online – but a growth in customers buying third-party brands from its website.
The clothing-to-homewares retailer today reported full-price product sales 0.6% lower in the first quarter of its financial year, the 13 weeks to May 1, than in the same period in 2019. Next, ranked Leading in RXUK Top500 research, says the two-year comparison gives a more meaningful comparison.
Within that, online sales are up by 65% – with growth faster on its Label website (+71%), where it sells third party brands, and in international online sales (+67%) than on its own brand website (+63%). At the same time, in-store sales in the UK and Ireland are far lower (-76%) than two years ago, partly since its stores were closed for much of the time during the third UK Covid-19 lockdown. When declining income from finance interest (-12%) is included, total full price sales were down by 1.5%. The retailer says that full-price sales have been strong over the last three weeks (+19%; stores +2%, online +52%), as a result of pent-up demand – but also says hat is “very unlikely to be indicative of demand for the rest of the year”. The retailer, has raised its profit expectations for the full year by £20m to £720m.
Next says these headline figures might suggest that demand has shifted from stores to online - but in fact that is not the case, since shoppers are now buying from very different categories. “Very few of the retail sales lost on adult clothing were recovered online,” it says. “In reality, it was the growth in online sales of Next homeware, third-party brands (through Label) and Next childrenswear, along with increasing sales overseas hat served to make up for the sales we lost in our stores.”
During the quarter, sales of Next adult clothing fell (by -46%, or £150m), but its own brand homewares (+12%, £17m), childrenswear (+2%, £3m) grew - though that at a pace that was overshadowed by the growth of third-party brands sold on the Next website (+67%, £64m). UK sales alone were more sharply down (by -9% or £66m) than overall sales, as international sales (+67% or £77m) help lift the total full price product sales figure to a decline of -0.6%, or £5m.