Next Sees Clothing Sales Benefiting From Canceled Vacation Plans

Next Plc Chief Executive Officer Simon Wolfson said that Brits who aren’t traveling are spending more on clothes.

The U.K. retailer raised its outlook as people are returning to main-street stores in greater numbers than initially expected. Wolfson said although sales of swimwear are still down significantly as Britons eschew summer beach holidays, general clothing sales are increasingly picking up to last year’s levels.

“If people are not overseas, then they are here in the U.K. buying clothing,” he said in an interview. “There are all sorts of things going on, but we think people not going overseas is supporting sales.”

German sports-apparel maker Puma SE also said Wednesday that sales this month are near the level of last year. The bulk of Next’s stores are in the U.K., where many consumers are staying at home during holidays rather than traveling abroad. This week, the country said people returning from Spain need to self-quarantine due to the uptick in Covid-19 cases there.

Next shares surged as much as 10% after the company said Wednesday that it expects to report pretax profit of about 195 million pounds ($252 million) for the year. The midpoint of the company’s previous forecast was for zero earnings.

Puma also gave evidence that consumers are dedicating more of their disposable income to clothing as they cancel trips. International travel will take time to return to pre-pandemic levels, CEO Bjorn Gulden said. That should help a recovery this year, and the company forecasts growth to resume in 2021.

“Our sector will benefit from that,” Gulden said. “Right now we see it clearly.”

Tourists often take advantage of lower garment prices abroad, particularly in markets such as Spain, the home of Zara owner Inditex SA.

Next buoyed sentiment as its update shows British consumers are starting to buy fashion again following months of decline. The retailer, which temporarily closed its e-commerce business at one point, said its warehouse capacity has since recovered and second-quarter online sales rose 9% like-for-like.

Like-for-like sales in reopened stores were down 32% in the second quarter. Wolfson said the company had expected a similar drop as to when the U.K. entered lockdown and retail sales fell 50% to 60%.

The British clothing retailer said it has much more clarity over where consumer demand is going, but added a caveat: if there’s a second lockdown, annual sales could fall as much as 33%. Wolfson said he remains cautious given that unemployment could increase as the U.K.’s job support program ends later this year.

“We have not been lulled into a false sense of security,” Wolfson said. “We are planning for the second half to be worse than what we have experienced in the last eight weeks.”

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