Buy
Sell
Share Name Share Symbol Market Type Share ISIN Share Description
Next Plc LSE:NXT London Ordinary Share GB0032089863 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  46.00 0.57% 8,158.00 8,148.00 8,152.00 8,180.00 8,026.00 8,142.00 306,748 16:35:24
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
General Retailers 3,997.5 748.5 472.4 17.3 10,846

Next PLC Trading Statement

28/10/2020 7:00am

UK Regulatory (RNS & others)


TIDMNXT

RNS Number : 4033D

Next PLC

28 October 2020

 
 Date:          Embargoed until 07.00hrs, Wednesday 28 October 2020 
 
 
 Contacts:      Amanda James, Group Finance Director (analyst calls) 
                NEXT PLC                         Tel: 0333 777 8888 
 
                Alistair Mackinnon-Musson        Email: next@rowbellpr.com 
                Rowbell PR                       Tel: 020 7717 5239 
 
 Photographs:   http://www.nextplc.co.uk/media/image-gallery/campaign-images 
 

NEXT PLC

Trading Statement - 28 October 2020

HEADLINES

-- Full price sales in the third quarter were better than we anticipated and were up +2.8% against last year. Total sales (including markdown sales) were up +1.4%.

-- Full year profit before tax, based on our new central sales scenario, is now forecast at GBP3 65m(1) , GBP65m higher than the central scenario given in September.

   --     Year end net debt is forecast to reduce by GBP4 87m to GBP625m. 

(1) Profit before tax is quoted on a 52-week basis. The financial information presented in this document does not reflect the impact of IFRS 16 Leases.

SALES FOR THE THIRD QUARTER AND YEAR TO DATE

The table below sets out the full price sales performance by business channel versus last year for the third quarter and year to date.

 
                                             Third quarter      Year to 
Full price sales (VAT exclusive)             to 24 October   24 October 
==========================================  ==============  =========== 
Online                                              +23.1%        +1.0% 
Retail                                             - 17.9%      - 47.2% 
                                            ==============  =========== 
Product full price sales                             +4.1%      - 21.6% 
Finance interest income                            - 13.0%       - 7.4% 
                                            ==============  =========== 
Total full price sales including interest 
 income                                              +2.8%      - 20.5% 
                                            ==============  =========== 
 

Full Price Sales Analysis by Channel by Week

The chart below shows full price sales by week. Online product sales are shown in blue, Retail in green and interest income in grey. The dotted black line shows the total full price sales for last year.

Click or paste the following link into your web browser to view the chart titled 'Full Price Sales by Week'. Refer to page 2 for the relevant chart.

http://www.rns-pdf.londonstockexchange.com/rns/4033D_1-2020-10-27.pdf

Product Sales

The sales performance by product category remains very similar to the second quarter, with Home and Childrenswear over-performing while demand for men's and women's formal and occasion clothing remains weak. Online sales remain strong, both in the UK and overseas. In Retail, out of town retail parks continue to perform better than high streets and shopping centres.

Finance Interest Income

Finance interest income fell by -13% in the third quarter driven by lower customer balances, which were down -16% on the previous year. These lower balances were as a result of much lower credit sales during lockdown in March, April and May (in the first half, credit sales were down -26%). In the third quarter, we saw a significant recovery in credit sales, which were up +1% against last year.

Monthly customer payments (as a percentage of customer balances) in the third quarter were 14.8%, a material increase on the same measure last year which was 12.5%. Default rates remain below last year. So as yet, we have not seen any adverse effects on the quality of our consumer debt. However, with current levels of economic uncertainty, we are maintaining the additional GBP20m bad debt provision that we charged in the first half.

We expect that improving credit sales (which would increase average balances) will be offset by higher payment rates, resulting in average balances and interest income remaining down around -16% in the fourth quarter.

Markdown Sales

Markdown sales were down -12.3% against last year. This reduction was driven by (1) lower footfall in our Retail stores and (2) capacity constraints in our Online warehouses, where we have chosen to prioritise full price sales over our clearance operation.

SALES, PROFIT AND CASH SCENARIOS

We have revised our guidance scenarios for the fourth quarter, which are set out below. There remains a very high degree of uncertainty in our estimates and much will depend on the progress of the pandemic, along with the Government and consumer reaction to developments. Our assumptions for each scenario regarding further lockdowns, Retail footfall, capacity constraints and stock are also given in the table. We would not want to give the impression that the assumptions below and their consequences are scientific or precise; they are intended to give an indication of the sort of things that might help or hinder sales in the run up to Christmas.

 
                               Upside            Central scenario             Downside 
======================  =====================  ====================  ========================== 
Q4 full price 
 sales                            0%                   - 8%                    - 20% 
                        =====================  ====================  ========================== 
Further                  No further            Further local         Two weeks of 
 lockdowns(2)             lockdowns             lockdowns             store closures 
                                                                      in England, Scotland 
                                                                      and Northern 
                                                                      Ireland 
                        =====================  ====================  ========================== 
Retail                   Busier stores         Some customers        Significant reduction 
 footfall                 prove no further      begin to avoid        in peak Christmas 
                          deterrent to          shops as they         footfall 
                          Retail shopping       get busier in 
                                                the run up to 
                                                Christmas 
                        =====================  ====================  ========================== 
Online warehouse         Warehouses succeed    Capacity constraints  Significant capacity 
 capacity constraints     in operating          and increased         constraints and 
                          at maximum capacity   self-isolation        widespread self-isolation 
                          every day in          rates begin to        in the run up 
                          the run up to         impact sales in       to Christmas 
                          Christmas             the peak weeks        peak 
                                                before Christmas 
                        =====================  ====================  ========================== 
Stock                            Stock levels now sufficient to achieve all scenarios 
                        ======================================================================= 
 

(2) The effect of current lockdowns in Wales and Eire is included in all scenarios.

Further Store Closures

The biggest single unknown is whether England, Scotland and Northern Ireland will follow Wales' decision to shut non-essential retail shops. A two week lockdown in England, Scotland and Northern Ireland in November would reduce Retail full price sales by around GBP57m(3) (depending on timing), representing 17% of Retail full price sales and 6% of the Group's full price sales in the quarter.

We have found no evidence of the virus being transmitted in our stores; nor are we aware of any studies that suggest clothing and homeware retail presents a significant risk of infection.

(3) VAT exclusive sales

Second Half and Full Year Full Price Sales Estimates

For completeness, based on our new scenarios, full price sales growth in the second half and full year are set out below.

 
Full price sales versus last 
 year                          Upside  Central scenario  Downside 
=============================  ======  ================  ======== 
Fourth quarter                   0%          - 8%         - 20% 
Second half                     +1%          - 3%          - 9% 
Full year                      - 15%        - 17%         - 20% 
                               ======  ================  ======== 
 

Profit Before Tax, Cash and Net Debt

Based on these three scenarios for full price sales, the expected profit and net debt at the end of the year are set out below.

 
Profit before tax, cash and 
 net debt                       Upside   Central scenario  Downside 
==============================  =======  ================  ======== 
Profit before tax               GBP400m      GBP365m       GBP290m 
Reduction in year end net debt  GBP497m      GBP487m       GBP417m 
Year end net debt(4)            GBP615m      GBP625m       GBP695m 
                                =======  ================  ======== 
 

Based on our central scenario we anticipate profit before tax of GBP365m and for year end net debt to fall by GBP487m to GBP625m, which is comfortably within the Company's cash resources of GBP1.6bn(5) and represents 63% of the value of forecast year end nextpay receivables of GBP1bn.

Profit before tax is shown on a 52-week basis. This year is a 53-week year and we anticipate that the extra week will add around GBP12m to profit.

(4) Year end net debt at 53rd week.

5 Bond and bank facilities of GBP1.6bn do not include the Government's COVID Corporate Financing Facility (CCFF). Although

our application to the CCFF was accepted, we do not expect to draw on this facility.

Reconciliation of Revised Profit and Cash Flow numbers

Our new central scenario for profit before tax of GBP365m is GBP65m higher than the central scenario given in September. Our cash flow forecast has increased by GBP25m, which is GBP40m less than our increase in profit forecast. This is mainly as a result of a GBP30m acceleration in warehouse capital expenditure.

BREXIT PREPARATIONS

In September 2018 and 2019 we issued detailed papers(6) describing our Brexit preparations and an impact analysis of the UK leaving the EU without a trade agreement.

We are well prepared and have set up all the administrative, legal and physical infrastructure that will be needed to operate effectively at the end of the current transitional arrangements. This is the case whether the UK and EU reach a trade agreement or not.

There have been two significant changes since last year:

1) The Temporary Tariff regime will be updated to the UK Global Tariff, effective from 1 January 2021.

   2)    The agreement of the Northern Ireland Protocol. 

(6) https://www.nextplc.co.uk//media/Files/N/Next-PLC-V2/documents/2019/Brexit%20paper%20Sept%202019%20Finalv2.pdf

Impact of the UK Global Tariff

We anticipate that the new tariffs will increase NEXT's annual import duty costs by around GBP13m (based on pre-COVID levels of sales). We had previously estimated that the Temporary Tariff Regime would reduce NEXT's import duty costs by around GBP25m.

The GBP13m cost increase would only add +0.3% to prices in theory, but in reality much of this increase is likely to be offset through re-sourcing or renegotiation.

Northern Ireland Protocol

The Northern Ireland Protocol was agreed by the UK Government in October 2019 and aims to avoid the introduction of a hard border on the island of Ireland in the event that there is a no-deal Brexit. The Protocol means that UK authorities apply EU customs rules to goods entering Northern Ireland. This requires a new administrative process for goods entering Northern Ireland from the rest of the UK.

There is, as yet, no clear guidance on what administrative measures will need to be put in place, but we do not anticipate it will present a material threat to our trade in Northern Ireland or Eire. However, we would encourage the UK Government to provide clarification of the process as soon as possible.

Ports

The biggest single risk of a no-deal Brexit is that our ports do not cope effectively with increased levels of administration. The highest risk point of entry is Dover, though we have relatively little stock (less than 2%) entering through this port.

Brexit Summary

A no-deal Brexit is not NEXT's preferred outcome. However in the event the UK does leave without a deal, we remain confident that our own systems are well prepared for no-deal. So, as long as our ports continue to operate effectively, we do not believe that a no-deal Brexit poses a material threat to the ongoing operations or profitability of the Group.

CHRISTMAS TRADING STATEMENT

We intend to issue an update on sales to Saturday 26 December 2020 on Tuesday 5 January 2021.

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

TSTFDLLLBBLXFBV

(END) Dow Jones Newswires

October 28, 2020 03:00 ET (07:00 GMT)

1 Year Next Chart

1 Year Next Chart

1 Month Next Chart

1 Month Next Chart
ADVFN Advertorial
Your Recent History
LSE
NXT
Next
Register now to watch these stocks streaming on the ADVFN Monitor.

Monitor lets you view up to 110 of your favourite stocks at once and is completely free to use.

By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions

P: V:gb D:20210121 18:42:36