Next Joins Zara and H&M in Recovery From Covid-19 Lockdowns

(Bloomberg) -- Next Plc raised its outlook for a second time since coronavirus lockdowns shut its stores, joining apparel chains Zara and H&M in reporting better-than-expected recoveries.

The U.K. retailer now expects a pretax profit of 300 million pounds ($388 million) for the year. The midpoint of the company’s previous forecast was 195 million pounds.

Next has raised its outlook twice since the height of the pandemic. In April, the retailer’s worst-case scenario was a loss of 150 million pounds and its midpoint was for no earnings. In July, it upgraded the outlook after stores reopened.

The shares rose 1.7% early Thursday in London. They’ve fallen about 11% since the start of the year.

Sales through the pandemic have been more resilient than expected as the cooler weather in August prompted the purchase of heavier autumn clothing, Next said. A decline in overseas vacations as Britain imposed quarantines on travelers returning from many countries also boosted domestic clothing sales.

Next cautioned that robust sales in the 13 weeks since its stores reopened may not continue. It said the end of the government’s wage support program next month and a resurgent pandemic could hit demand again. It added that a new U.K. rule limiting social gatherings to six people could depress demand for gifts.

Although Next currently expects its full-price sales to be down 12% for the year, the drop could be as big as 34% in a “downside scenario if we experience more widespread lockdown measures and store closures,” the company said. Because of the uncertainty, the company said it won’t pay an interim dividend.

Next’s update comes after Spanish retailer Inditex SA, the owner of Zara, also buoyed the market, reporting another quarter of steady improvement. Sweden’s Hennes & Mauritz AB surprised with a stronger-than-expected return to profit.

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