Next joins Zara, H&M in recovery from Covid-19 lockdowns

[LONDON] Next raised its outlook for a second time since coronavirus lockdowns shut its stores, joining apparel chains Zara and H&M in reporting better-than-expected recoveries.

The UK retailer now expects a pre-tax profit of £300 million (S$528.6 million) for the year. The midpoint of the company's previous forecast was £195 million.

Next has raised its outlook twice since the height of the pandemic. In April, the retailer's worst-case scenario was a loss of £150 million and its midpoint was for no earnings. In July, it upgraded the outlook after stores reopened.

The shares rose 1.7 per cent early Thursday in London. They've fallen about 11 per cent since the start of the year.

Sales through the pandemic have been more resilient than expected as the cooler weather in August prompted the purchase of heavier autumn clothing, Next said. A decline in overseas vacations as Britain imposed quarantines on travellers returning from many countries also boosted domestic clothing sales.

Next cautioned that robust sales in the 13 weeks since its stores reopened may not continue. It said the end of the government's wage support programme next month and a resurgent pandemic could hit demand again. It added that a new UK rule limiting social gatherings to six people could depress demand for gifts.

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Although Next currently expects its full-price sales to be down 12 per cent for the year, the drop could be as big as 34 per cent in a "downside scenario if we experience more widespread lockdown measures and store closures", the company said. Because of the uncertainty, the company said it won't pay an interim dividend.

Next's update comes after Spanish retailer Inditex, the owner of Zara, also buoyed the market, reporting another quarter of steady improvement. Sweden's Hennes & Mauritz (H&M) surprised with a stronger-than-expected return to profit.

BLOOMBERG