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Next raises guidance despite challenges

by LLB Editor
29th Sep 21 11:51 am

The latest results from Next are a good indication of the headwinds the retail sector is facing at present.

Full-price sales in the first half were up 62 per cent compared with a year earlier and were 8 per cent ahead of the equivalent period in 2019. Over the most recent eight-week period, sales were a fifth higher than pre-pandemic levels, against expectations of a 6 per cent increase for the second half as a whole.

“Next is a best-in-class UK retailer so if even it is struggling to navigate staffing and supply chain issues then you know its peers will be really under the pump,” said AJ Bell’s Russ Mould.

“The company is also very upfront with its guidance, so you know you are getting an unfiltered version of events.

“Trading may have been better than expected in recent months, supporting an increase in full year guidance, but the company is clear on the risks it

faces heading into the key Christmas trading period.

“While Lord Wolfson and the rest of the senior management at Next do have a useful habit of painting a pretty dark picture for investors only for the reality to be a lot sunnier, the view that sales are being artificially inflated by pent-up spending and people not being able to use their money for overseas holidays seems a reasonable one.

“Next was quick to repay the Government support it benefited from during the pandemic. It is no stranger to self-reliance, so its call for a relaxation of immigration rules to address a shortage of workers and HGV drivers carries weight.

“Regardless of the immediate challenges, Next’s exceptional retail skills are likely to see it emerge from potentially a difficult few months’ trading in an even stronger market position.”

 

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