Good morning, it's Jack here taking on SCVR duties today.

Paul has flagged up the Next (LON:NXT) trading update - the company is well-known for is thoughtful and considered commentary so it's worth moving out of small cap territory to take a quick look at what Wolfson et al are saying...


Trading Statement

  • Full price sales in the second quarter were down -28% against last year - 'much better than expected' and an improvement on the best-case scenario given in its April Trading Statement.
  • Online warehouse picking and despatch capacity is now back at normal levels.
  • Full year profit before tax, based on our new central sales scenario, is now estimated at £195m.
  • New central scenario year end net debt is forecast to reduce by c.£460m.
  • The group has modelled three new scenarios based on FY sales being down -18%, -26% and -33%,

I'm not going to spend too long on this statement, but the narrative is encouraging. Next is a famously high quality retail outfit though, so I can only hope there is positive readacross for the rest of the industry:

our experience over the last 13 weeks has given us much greater clarity on our Online capabilities during lockdown and the state of consumer demand, and we are now more optimistic about the outlook for the full year than we were at the height of the pandemic.

In summary, the Company is in a much better position than we anticipated three months ago: consumer demand has held up better than expected and our Online warehouses have achieved much higher capacities than we thought possible. Costs have been well controlled, and we have taken steps to ensure that our balance sheet is secure.

Whilst much of our time has been focussed on managing the business through the pandemic, we have not lost sight of the fact our sector was already experiencing far-reaching structural changes as consumers increase their expenditure Online. If anything, these changes are likely to accelerate as a result of the crisis. So, we have continued to move the business forward, actively investing in the systems, Online capacity and business ideas that we believe will be important in a post pandemic world.

The fact that online is booming suggests Next is being rewarded more for its own strategic initiatives and underlying operating strength than…

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