TIDMNXT
RNS Number : 5749X
Next PLC
06 January 2022
Date: Embargoed until 07:00 hrs, Thursday 6 January
2022
Contacts: Amanda James, Group Finance Director (analyst Tel: 0333 777
calls) 8888
Alistair Mackinnon-Musson, Rowbell PR Tel: 020 7717
5239
Photographs: https://www.nextplc.co.uk/media/image-gallery/campaign-images
NEXT PLC
Trading Statement - 6 January 2022
SUMMARY
-- In the eight weeks to 25 December full price sales were up
+20.0% versus two years ago. This was GBP70m ahead of our previous
guidance for the period.
-- We have increased our full year profit before tax guidance by
+GBP22m to GBP822m which would be up +9.8% versus two years
ago.
-- Our initial guidance for the year ending January 2023 is for
full price sales to be up +7.0% versus the current year (year
ending January 2022). We estimate that profit before tax will be up
+4.6% at GBP860m.
-- The Board is declaring a further special dividend of 160p per
share to be paid at the end of January 2022. We intend to return to
our pre-pandemic ordinary dividend cycle in the year ahead.
This statement is divided into two parts. Part One gives the
performance for the eight weeks to 25 December and profit guidance
for the current year (year ending January 2022). Part Two gives
sales and profit guidance for the year ahead.
PART 1: THE CURRENT YEAR
Full Price Sales for the Eight Weeks to 25 December
The table below sets out the full price sales performance for
the eight weeks to 25 December and for the year to date. Please
note that percentage variances are given against two years ago.
Online sales are broken down into (1) NEXT branded stock sold in
the UK, (2) LABEL third-party brands sold in the UK and (3) sales
Overseas. For completeness, the last row of the table shows our
sales performance compared to last year (2020/21).
Q4 Year
Full price sales (VAT exclusive) versus 2019 to 25 December to 25 December
================================================================ =============== ===============
Online NEXT UK +31% +36%
Online LABEL UK +85% +76%
Online Overseas +36% +51%
=============== ===============
Total Online +45% +49%
Retail (UK and Ireland) - 5.4% - 24%
=============== ===============
Total Product full price sales +21% +15%
Finance interest income - 2.5% - 7.8%
=============== ===============
Total full price sales including interest income +20% +13%
Total full price sales including interest income versus 2020/21 +23% +35%
2021/22 Full Price Sales by Quarter
We were expecting sales growth in Q4 to be weaker than Q3,
however, a strong revival in NEXT branded adult formal and
occasionwear significantly improved sales throughout the final
period.
In the run up to Christmas our stock levels were materially
lower than planned. We also experienced some degradation in
delivery service levels as a result of labour shortfalls in
warehousing and distribution networks. The fact that our sales
remained so robust in these circumstances is, we believe, testament
to the strength of underlying consumer demand in the period.
Click or paste the following link into your web browser to view
the chart titled 'Full Price Sales Variance by Quarter 2021 versus
2019'. Refer to page 2 for this chart.
http://www.rns-pdf.londonstockexchange.com/rns/5749X_1-2022-1-5.pdf
End-of-Season Sale
Surplus stock was much lower than expected, and stock for the
end-of-season Sale was down -18% versus two years ago. The
reduction in Sale stock was mainly the result of better than
expected full price sales in the period. Clearance rates, so far,
have been in line with our expectations.
Sales and Profit Guidance for the Current Year
For the full year we now expect full price sales growth of
+12.8% versus 2019/20, GBP70m ahead of our previous guidance. We
have increased our pre-tax profit guidance for the full year by
+GBP22m to GBP822m. (This forecast is based on full price sales in
January being +12% ahead of two years ago).
Guidance for the full year Full year Versus Previous Versus
2021/22 guidance 2019/20 guidance 2019/20
=========================== ========= ======== ========= ========
Full year full price sales GBP4.3bn +12.8% GBP4.2bn +11.0%
Group profit before tax GBP822m +9.8% GBP800m +6.9%
Earnings Per Share (Basic) 530.0p +12.2% 516.9p +9.4%
========= ======== ========= ========
Cash Flow and Special Dividends in the Current Year
We now expect to generate at least GBP345m of free cash(1) ,
before shareholder distributions. On 3 September 2021 we paid a
special dividend of 110p per share, with a total value of GBP140m.
The Board has decided to return a further GBP205m to shareholders
by way of a second special dividend of 160p per share. This
dividend will be paid on Friday 28 January 2022 to shareholders
registered at the close of business on 14 January 2022. Shares will
trade ex-dividend from 13 January 2022.
(1) 'Free cash' here is defined as cash generated after
interest, tax, capital expenditure, the financing of customer
receivables and working capital but before the payment of any
dividends.
PART 2: THE YEAR AHEAD
Economic Uncertainties for 2022
Our headline sales growth expectations of +7.0% sounds
uncontroversial. However, forecasting sales for the year ahead is
unusually difficult and the buoyancy of recent months makes it all
the harder. We are assuming no further disruption from COVID; but
there are five areas of uncertainty in the wider economic
environment that we need to bear in mind, these are:
Pent-up demand To what extent has the buoyancy of the last nine
& savings months been the result of pent-up demand combined
with the spending of savings accumulated over the
pandemic? How much of this will reverse out as
we move through next year?
Travel and To what extent will the return to spending on overseas
leisure holidays and other social activities depress demand
for discretionary goods?
Essential To what extent will inflation in essential goods
goods inflation and services (fuel, electricity, food, etc) reduce
discretionary spending on clothing and homeware?
NEXT goods To what extent will the inflation in our own selling
inflation prices, estimated at around 6% in the second half
(see below), serve to depress the demand for our
products?
Tax and To what extent will the 1.25% increase in National
interest Insurance and possible increases in mortgage rates
rates affect discretionary spending?
Clear answers to these questions are impossible at this stage
but they all point to a tougher environment as we move through next
year.
Full Price Sales Guidance for the Year Ahead
Our guidance for the year ahead assumes full price sales growth
of +7.0% versus 2021/22 (i.e. a one year comparison). This headline
growth rate represents +6.5% compound annual growth against
2019/20, which was the last year to be unaffected by COVID.
Our guidance reflects very strong growth in the first quarter
(when stores were shut in 2021) and anticipates much weaker
year-on-year growth in the last three quarters of 2022 as
comparative numbers improved in 2021. In the chart below, the blue
bars show the one year full price sales growth by quarter. The
green line shows the compound annual growth rate (CAGR) versus the
year ending January 2020 (i.e. over three years) for each quarter.
As can be seen, on a quarter by quarter basis, the compound annual
growth against three years ago looks more realistic.
Click or paste the following link into your web browser to view
the chart titled 'Full Price Sales Variance by Quarter' . Refer to
page 3 for this chart.
http://www.rns-pdf.londonstockexchange.com/rns/5749X_1-2022-1-5.pdf
Outlook for Inflation 2022
We have revised our estimates for selling price inflation in the
year ahead, mainly as a result of the unanticipated persistence of
higher freight rates into the back end of the year ahead, along
with some further increases in manufacturing costs. In addition to
the increases in the cost of our goods, we are also experiencing
increases in UK operating costs, mainly as a result of UK wage
inflation. We anticipate that average wage inflation across the
NEXT Group will be 5.4%, driven by the increase in the national
living wage of 6.6%(2) along with wage inflation in sectors where
there are labour shortages, most notably in Warehousing and
Technology.
(2) Effective from April 2022.
The table below sets out the expected inflation in our
like-for-like selling prices in the first and second half of the
year ahead. Our selling prices are increasing broadly in line with
the landed(3) cost of goods.
Spring & Summer Autumn & Winter
================================= ================ ================
UK like-for-like selling prices +3.7% +6.0%
================ ================
(3) Landed costs are the cost of goods including the cost of
freight.
Like-for-like price comparisons are given between identical or
very similar items. We expect our total average selling prices to
increase by more than the like-for-like price increases. This
change is, we believe, the result of consumers choosing to buy
slightly fewer items, but at moderately higher price points -
perhaps exchanging volume for quality.
Summary of Sales, Profit and Earnings Per Share Guidance
If full price sales are up +7.0%, we estimate that Group profit
before tax will be GBP860m, up +4.6% versus the current financial
year. In this scenario we have assumed that sales grow faster than
profits as a result of (1) the absence of COVID rates relief in the
first quarter and (2) a return to more normal levels of surplus
stock for our end-of-season Sales.
Guidance for the full year 2022/23 Full year guidance Versus 2021/22
=================================== ================== ==============
Full year full price sales GBP4.6bn +7.0%
Group profit before tax GBP860m +4.6%
Earnings Per Share (Basic) 553.8p +4.5%
================== ==============
Please note that the anticipated Earnings Per Share does not
account for any potential share buybacks in the year ahead.
Cash Flow Guidance for the Year Ahead
Based on the guidance above we anticipate underlying free cash
available for distribution to shareholders of GBP430m as set out
below.
Cash flow for year ending January 2023 GBPm (e)
======================================= ========
Profit before tax 860
Tax (145)
Depreciation 105
Capital expenditure (190)
Customer receivables (130)
Working capital and other (70)
========
Free cash flow anticipated in the year 430
There are two points within the cash flow that benefit from
further explanation:
Capital Our capital expenditure estimate of GBP190m is
expenditure GBP55m higher than the previous estimate of GBP135m,
given in April 2021. This is mainly due to the
acceleration of warehouse capacity projects and
new technology projects.
Customer receivables In the past we would have funded 85% of the receivables
growth with debt. In the year ahead, as part of
the process of re-setting our net debt to its
current level, we intend to fully fund the increase
in receivables with cash generated in the year.
Dividends and Shareholder Returns
In the year ahead we plan to return to our pre-pandemic ordinary
dividend cycle, with a final dividend proposed in March 2022 and,
subject to shareholder approval at the AGM, paid in August 2022;
and an interim dividend declared in September 2022 and paid in
January 2023.
Any remaining surplus cash(4) (after accounting for the costs of
any investments or acquisitions) will be returned to shareholders
by way of share buybacks or special dividends. Any share buybacks
would be subject to achieving a minimum 8% equivalent rate of
return (ERR). As a reminder, ERR is calculated by dividing the
anticipated pre-tax profits by the current market capitalisation(5)
of the Group. As always, our decisions concerning buybacks or
special dividends will be subject to market conditions and the
interests of shareholders generally.
(4) Surplus cash is free cash less the cost of ordinary dividends .
(5) Market capitalisation is calculated based on shares in
circulation of 127.6m, so excludes shares in NEXT's Employee Share
Option Trust.
FULL YEAR RESULTS ANNOUNCEMENT
We are scheduled to announce our results for the full year
ending January 2022 on Thursday 24 March.
Forward Looking Statements
Certain statements in this Trading Update are forward looking
statements. These statements may contain the words "anticipate",
"believe", "intend", "aim", "expects", "will", or words of similar
meaning. By their nature, forward looking statements involve risks,
uncertainties or assumptions that could cause actual results or
events to differ materially from those expressed or implied by
those statements. As such, undue reliance should not be placed on
forward looking statements. Except as required by applicable law or
regulation, NEXT plc disclaims any obligation or undertaking to
update these statements to reflect events occurring after the date
these statements were published.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
TSTFELLBLFLBBBE
(END) Dow Jones Newswires
January 06, 2022 01:59 ET (06:59 GMT)
Next (LSE:NXT)
Historical Stock Chart
From Mar 2024 to Apr 2024
Next (LSE:NXT)
Historical Stock Chart
From Apr 2023 to Apr 2024
