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2022-23 profit up better-than-expected 5.7%
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Sees prices up 7% in spring/summer, up 3% in autumn/winter
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Maintains sales and profit guidance for 2023-24
(Adds detail, shares, story links)
By James Davey
LONDON, March 29 (Reuters) - British fashion retailer
Next reported a better-than-expected 5.7% rise in annual
profit on Wednesday and said it would not need to increase
prices by as much as previously thought.
However, it still expects higher spending on wages, energy
and technology to reduce its profit this year, and the
retailer's shares were down 6% in morning trading after it
retained its cautious outlook.
Next, which trades from about 500 stores and online and is
often considered a good barometer of how British consumers are
faring, said inflationary pressures were expected to ease as
freight costs drop and the cost of goods improves.
The company has shown more resilience than most to the
cost-of living crisis in Britain and is considered by analysts
to be one of the best run retailers in the country. Its shares
had been up 16% this year prior to Wednesday's update.
It now expects 7% like-for-like price inflation in the
spring-summer season and 3% in autumn-winter - down from its
previous forecast of 8% and 6%, respectively.
That reflected a significant drop in container freight costs
and improving factory gate prices - the price at which it
purchases goods - due to increased factory capacity and efforts
to move production to lower priced sources of supply.
"We still anticipate we'll be moving production out of China
and into other regions like Bangladesh, India, South East Asia,"
CEO Simon Wolfson told Reuters.
"But if I look at the things that are moving the dial, it's
more within those territories, finding new sources of supply
rather than moving countries."
FALLING INFLATION Next's improved price outlook fits with a Bank of England forecast for inflation to fall from its 10.4% annual rate in February to below 4% by the end of 2023.
Next made a pretax profit of 870.4 million pounds ($1.07 billion) in the year to January 2023, up from 823.1 million pounds the year before and above its 860 million pound guidance. Sales of items sold at full price rose 6.9% in 2022-23, with total sales up 8.4% to 5.15 billion pounds.
For 2023-24, Next kept its forecast for a 1.5% decline in full-price sales and profit of 795 million pounds. It expects its sales performance in the first half of the year to be weaker than in the second half. In the first half last year, unusually warm summer weather coincided with the release of pent-up demand for events after the pandemic.
In the first eight weeks of its new financial year, full-price sales were down 2.0%, in line with its expectations. Wolfson said he did not think the downturn in the UK economy would be long lasting and anticipated a strong recovery in 2024. (Reporting by James Davey; Editing by Kate Holton and Tomasz Janowski)
