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Clothing and homeware chain Next has begun to reverse its fortunes after the Covid slump as it upgraded its full-year forecasts for a second time after recent strong trading.
The FTSE 100 retail bellwether said full price sales in the last seven weeks were up 4 per cent compared to last year, helped by cool weather and fewer people going on holiday abroad.
It now expects profit before tax to come in at £300million, up from its previous guidance of £195million given at the end of July. That, however, is less than half what it was expecting before the pandemic struck. © Provided by This Is MoneyNext said a recent increase in sales was helped by cool weather and fewer people going on holiday abroad
Michael Hewson, chief market analyst at CMC Markets UK, says: 'When you consider that in January, Next was expecting to see pre-tax profits of £734million for 2020, this is a remarkable turn in fortunes from what the business was facing as recently as a couple of months ago.'
But Simon Wolfson, Next's chief executive, said the sales performance through the pandemic had been 'more resilient than we expected'.
'The scale of our online business (in the UK and overseas), the breadth of our product offer, and the fact that much of our store portfolio is located out of town, have served to mitigate the worst effects of the pandemic on trade,' he added.
Investors seem to have received well the update, with shares rising 1.7 per cent to £62.77 in morning trading on Thursday. But they remain 12 per cent down so far this year.
Despite the upgraded forecasts, the group still expects sales to fall 12 per cent this year.
In the first half, sales fell 33 per cent, hammered by store closures during lockdown and the group fell made pre-tax losses of £16.5million for the six months to the end of July - compared to profits of £327.4million a year earlier.
On an underlying basis, it saw profits crash 97 per cent to £9million, though it had initially expected to be loss-making.
Next, which has around 500 stores across the country, warned it still expects to close 13 shops this year, down from 14 predicted in March.
Its update follows that of Zara's owner Inditex yesterday, which said a surge in online trade helped it to record a healthy profit during the summer. © Provided by This Is MoneyNext, which has around 500 stores across the country, warned it still expects to close 13 shops this year, down from 14 predicted in March
Next said it has not seen a deterioration in bad debt rates or any extension in the length of time customers choose to pay down their accounts.
Russ Mould, investment director at AJ Bell, says that despite the crisis, Next is still 'managing to keep its head above water'.
'Interestingly it has seen no change in bad debt trends, which one might have expected to shoot up amid growing unemployment,' he said.
'Next's management has always taken a cautious view and is not being complacent, which explains why it is making provisions now for an increase in bad debts just in case.
'That summarises Next to a tee. Its ability to keep making money through the crisis should be cause for celebration, but Next would never party too hard.'