FTSE 100 retailer Next took off on Thursday after releasing strong full-year financials and upgrading sales and profit guidance for the current period.
At £106.20 per share, Next’s share price was last 6.3% higher on the day and the blue-chip index’s biggest riser.
Total sales at Next rose 8.2% during the 12 months to January, to £6.32 billion, propelled by a 5.8% improvement in full-price sales.
As a consequence, pre-tax profit soared through the £1 billion marker for the first time last year.
At £1.01 billion, this represented a 10.1% year on year increase.
Next raised the full-year dividend to 233p per share from 207p in financial 2024.
Strong Upgrade
Next also announced a upgrade to sales and profit forecasts for the current financial period. It said that “full price sales in the first eight weeks of the year have been ahead of our expectations.”
Full-price sales during the first half are now expected to be up 6.5% year on year, up from prior guidance of a 3.5% increase.
As a consequence, Next now tips full-year corresponding sales growth at 5%, higher than the previously tipped 3.5% rise.
The retailer kept predicted second-half sales growth locked at 3.5%, however. It cited strong comparatives for last year, combined with an uncertain outlook for the period.
Next said that “we expect the UK tax rises in April to weaken the UK employment market and negatively impact consumer confidence as the year progresses.”
Pre-tax profits for the full year are now expected to be £1.07 billion, up 5.4% year on year. This is an increase of £20 million from previous guidance.
Optimistic Tone
Chief executive Lord Simon Wolfson commented that “it is unusual for Next to begin a year on an optimistic note, yet that was our stance this time last year.”
Commenting that “what cautious optimism appears, now, to have been well founded,” he cited reduced turbulence from the shift to physical stores to online, an abating cost of living crisis, and a conclusive end to the Covid-19 pandemic.
Looking ahead, Wolfson said that “we are as positive about the company today as we were then, albeit in an environment where the risks to the wider UK economy are growing.”
Monentum In Tough Times
Analyst Russell Pointon of Edison commented that “the results highlight Next’s disciplined approach to stock management, cost control, and its increasingly diversified business model, which includes a thriving third-party brand platform.”
Despite interest rate risks and weak consumer spending, he noted that “the company’s international expansion and focus on efficiency position it well for sustainable growth.”
eToro analyst Adam Vettese said that “an important recognition of the importance of the online channel and expansion across multiple distribution streams has been key to Next diversifying its revenue from a traditional high street stalwart.”
He added that “the challenge now will be to maintain the momentum. The previous two members of the billion club in M&S and Tesco went on very different trajectories following the milestone. It could be argued that economic conditions improving will be a tailwind, although there are some uncertainties that remain.”
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