Next Plc has reaffirmed its full-year guidance as the apparel retailer reported sales in-line with company expectations for the third quarter, despite a slow down in growth from the first half of the year.
Full price sales for the 12 weeks to 27 October were up 2% on last year, in line with company guidance, Next reported in its latest trading update. Online sales in the period surged by 12.7%, while Next retail sales dropped by 8%.
For the year to date, meanwhile, full price sales were up 3.7% on last year. Sales in the retailer’s online business during the period were particularly strong, up 14.8%, while retail sales slipped by 6.3%.
Looking ahead, the retailer said it is maintaining the full-year sales and profit guidance outlined five weeks ago in its half-year results statement. This includes expectations for full-year profit before tax to total GBP727m, delivering a growth in earnings per share of +5%.
Shares were down by more than 3.5% as the news broke this morning (31 October).
Online continues to drive sales performance
Sofie Willmott, senior retail analyst at GlobalData, notes that although sales growth slowed in the third quarter from the first half, Next’s performance remains robust and continues to be driven by its online channel, which accounts for almost half of product sales.
“Next’s investment in its digital channels has paid off, with online sales year-to-date accelerating 14.8% against a strong comparative of 9.4%,” she adds.
The retailer has spent more on digital marketing in FY2018/19 targeting both new and existing customers with personalised recommendations, while also promoting its Next Unlimited delivery saver scheme and improving the on-site shopping experience by making small changes to enhance the overall proposition.
“Despite being a mature online player, Next is very aware that it must continue to innovate to capture online spend and meet the rising expectations of UK consumers,” Wilmott says. “Alongside these initiatives, Next is focusing on integrating in-store and online channels to better utilise store stock (making this available online) and to offer same day click & collect in selected stores. Although other clothing retailers offer similar services, Next is well-placed to capitalise on the strong links between channels – around 50% of the retailer’s online orders are collected from store.”
However, despite Next’s attempts to create interest and drive cost efficiencies by trialling partner brands in stores, retail sales continue to tumble.
Nevertheless, Wilmott says Next’s overall sales are much better protected in the challenging UK market given its high online penetration and as such, it is unlikely to face the dramatic woes of retailers like Debenhams’.
Richard Stables, CEO of Kelkoo, concurs.
“Online sales up, in-store sales collapsing – this is becoming an everyday occurrence for traditional, bricks-and-mortar retailers such as Next, H&M and Ted Baker.”
He adds with the best value Black Friday deals now often appearing online rather than in-store, it’s likely that consumers will continue to avoid the high street during the peak season.
“It seems that retailers are resigned to this fact as staff levels are due to plummet by a third,” Stables says.
Next will issue its usual update for sales to 24 December 2018 on 3 January 2019.