Next (LON:NXT)
8.354p (up 3% today at 09:40) - mkt cap £11.1bn
Trading Statement for Q1 (13 weeks to 1 May 2021)
I like to check all updates from Next, as they’re the best in the business for clarity & detail, which has interesting read-across for other retailers, and the economy generally.
The headlines show that Next had a remarkably good Q1 (Feb-April 2021) -
· Full price sales in the thirteen weeks to 1 May were down -1.5% on two1 years ago. Our previous central guidance assumed that Q1 would be down -10% and we have beaten this Q1 forecast by £75m.
· We have increased our central guidance for full year profit before tax by +£20m to £720m2.
· This profit upgrade accounts for the £75m sales over-achievement in Q1. We have not raised our sales guidance for the rest of the year, which remains at +3% against two years ago.
Bear in mind that its shops were shut for most of this period! (but did have a 3 week surge on re-opening in April).
As shown in the table below, Next has once again been able to replace almost all its lost physical store sales, with increased sales online. That is a fantastic business model, and has made it so resilient during the pandemic.
Although the explanation given does paint a somewhat different picture, of a change in product mix occurring -
Overall full price product sales (excluding interest income) were only down -0.6% despite the tenweek closure of our Retail stores. The number makes it appear as if almost all the sales we lost in stores were simply transferred Online. This was not the case. In fact, very few of the Retail sales lost on adult clothing were recovered Online.
In reality, it was the growth in Online sales of NEXT Homeware, third-party brands (through LABEL) and NEXT Childrenswear, along with increasing sales Overseas, that served to make up for the sales we lost in our stores.
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Why are the shares on a PER of about 18 then (cheap, arguably)? Probably because the online growth is just replacing lost sales from the stores. So over the last 6 years or so, profit has been flat overall, with a sharp V relating to the pandemic.
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