Next upgrades profit forecast as pandemic shopping behaviours unwind

In a trading update for the second quarter of the year, Next increased its full-year profit guidance by £10m to £860m, as sales for the period were up 5% – an increase of £50m. 

Next reported full-price sales were higher than expected for the period – up 4.7% due to “unusually warm weather” in June and July and pent-up demand for social events.

Online sales slowed to just 0.2% while store sales surged 12% during the period. Next said that on a year-on-year basis, online had “ground to a halt” while stores were enjoying a “renaissance”, but it added: “We think that these changes reflect a short-term reversal of pandemic trends and are unlikely to be indicative of longer-term trends in consumer behaviour.”

On three-year comparisons, Next’s online sales were up 44.4% while store sales were up 4.7%. In the same comparison windows, Next full-price sales were up 25.5%, while its finance interest income was up 2.4%. 

Next said it had planned for store performance to be down against 2019, “following the long run of negative like-for-like retail sales we have experienced since 2016” and said it suspected stores had performed better than expected due to the closure of competitor’s shops.

The retailer said online return rates have also normalised to pre-Covid levels of 42%, following two years of “extremely low” returns during the pandemic.