Next PLC

The group has adjusted its central scenario for FY2021. Next now projects a 17% decline in full price sales, which implies an 8% decline in the fourth quarter of the year, broadly in line with our expectation. Our forecast assumes that sales and EBITDA will gradually improve, but that sales will not return to pre-pandemic levels within the next two years. Nevertheless, there could still be meaningful industry volatility. Profit margins might fall if demand remains well below pre-pandemic levels and the customer mix shifts toward lower-margin products. We also believe that Next will need to keep repositioning its product range as sales of higher-priced occasion and formal wear have weakened. In our view, apparel retailers globally face considerable pressure

...The COVID-19 pandemic and the resulting lockdown caused sales to drop significantly, but Next put up a resilient performance, supported by the strength of its online platform and its focus on cost management and cash preservation. Next's sales deteriorated by 54% during the U.K.'s lockdown period that began at the end of March 2020. The sharp drop in sales has started to reverse as stores have reopened and online operations resumed. As sales performance improved, Next's online business grew by 23% in the third quarter. This partly compensated for the continued weak performance in stores which declined by 18% for the same period. Next has benefitted from its developed e-commerce capability; online sales already accounted for about 50% of revenue in financial year (FY) 2020, allowing it to capture the acceleration in demand for online shopping as the pandemic has pushed consumption away from brick-and-mortar stores. The group has adjusted its central scenario for FY2021. Next now projects...

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