Next Raises Forecast as Post-Lockdown Demand Fuels Sales

(Bloomberg) --

Next Plc raised its profit forecast again as shoppers returned to stores after the end of lockdowns, fueling sales at the U.K. fashion chain.

In an unscheduled trading update, the British clothing chain, a mainstay of many malls and main streets, said it now expects full-year pretax profit of 750 million pounds ($1 billion). That’s 30 million pounds above the earlier guidance.

Next’s bullish outlook means it also now expects sales for the rest of the year to grow 6% -- double the previous forecast. The stock surged as much as 11% in London trading, the biggest gain in more than a year.

The profit upgrade will “reassure investors that the business is back on track,” said Eleonora Dani, an analyst at Shore Capital. “Next has been a retail survivor.”

Returning Cash

The retailer cited a number of possible reasons for the sales surge, including pent up demand for clothing. Many customers, locked down for months, splurged when the weather became warm at the end of May, according to Next.

The company also said people were taking fewer holidays overseas as a result of travel restrictions, which “likely has increased domestic spending.” Next also believes that consumers saved more during the pandemic.

Next sells its own range of fashion and third-party brands online. The retailer recently set up Total Platform, a unit that allows other brands to use its IT, warehousing and logistics network for their own e-commerce business.

The retailer said sales across all divisions improved during the 11 weeks ended July 17, with “exceptional” performances from its home and childrenswear departments. Online sales, which boomed during lockdowns, continued to rise even after stores reopened.

The retailer decided to repay 29 million pounds of tax relief it received from the government during the pandemic. Next plans to distribute excess cash to shareholders through special dividends.

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