After stronger than expected trading, fashion and home giant Next has upped profit expectations. Data provided by the retailer showed the categories and factors that shaped consumer behaviour and powered the strong performance.

Next gave four likely reasons that contributed to its “unexpectedly strong sales performance”. They were pent-up demand for adult clothing, the hot weather at the end of May and start of June, as well as increased domestic spending as foreign holiday plans were disrupted, and higher consumer savings.

The warm weather at the end of May and the start of June led to a sharp rise in sales. Next points out that growth noticeably slowed once temperatures began to fall, as can be seen in the graph above. 

The rise of staycations was also cited as a potential contributor to sales. That likely effect has been noted by others. In February, market research specialist Mintel predicted that domestic holiday tourism sales in summer 2021 would reach a 10-year high of £7.9bn in customer spend. 

As many UK residents trying to avoid facing quarantine amid the ever-changing nature of the government’s travel lists, domestic spending has benefited as people opt to stay at home or holiday in the UK.  

The trend was also reflected in the BRC-KPMG retail sales monitor for June. 

Full-price product sales (VAT exclusive) vs 2019 (etail and Online added together)Q1Q2 (to July17) H1 (to July17)
UK Next-branded adult clothing  -46%  -6%  -27%
UK Next-branded childrenswear 2%  12%  6% 
UK Next-branded homeware 12%  40%  25% 
UK Next brand -22%  7%  -8% 
UK label third-party brands (including Lipsy sold in store) 67%  64%  66% 
Total UK full-price sales -9%  16%  2% 
Overseas online 67%  61%  64% 
Overseas retail (Ireland)  -100%  1%  -54% 
Total full-price product sales -0.6% 20.8% 9.3%

British Retail Consortium chief executive Helen Dickinson said then: “With many people taking staycations or cheaper UK-based holidays, many have found they have a little extra to spend at the shops, with strong growth in-store in June. Fashion and footwear did well while the sun was out in the first half of June.”

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Consumers have also increased their savings over the past year. That could be seen when 79% of those surveyed in the Deloitte consumer confidence index in Q2 2021 reported that they have saved money over the course of the pandemic. 

Next’s sales also reflected the growing importance of online channels following the pandemic, as online sales rose 56% in the first half of the year, while bricks-and-mortar sales fell by 43% in the same period. 

The retailer’s home ranges also drew shopper interest. Sales in Next’s home department rose 40%, with the retailer rising into the top 10 retailers for homewares at the start of 2021, according to GlobalData.

The homewares boom shows no signs of abating. GlobalData senior apparel analyst Emily Salter said: “Continued working from home and a longer-term shift to hybrid working will also fuel the home market for some time yet.” 

Next Beauty and Home

Salter said that the combination of factors that aligned for Next should also assist other retailers: “I think Next is definitely not the only retailer that is going to have experienced this.” She points out that the increase in consumer saving coupled with higher levels of domestic spending may particularly benefit apparel retailers such as Joules and Seasalt located in staycation hotspots.

But she thinks increased domestic spending will subside following the summer: “Once restrictions were lifted around June-time, people began spending a lot more and a lot of people are realising how much they’ve spent giving the increased socialising.”

She points to the increased volume of events, such as weddings, that typically take place during the summer months and concludes: “People will realise how much having a normal life again will cost.”

While this combination of factors looks set to offer a welcome boost for the rest of the summer, it may not be something retailers can take for granted going forward into the autumn.

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