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Retailer Next shares soar over 8% to almost revisit post-Brexit highs after Q1 sales were much stronger than expected allowing it to improve its FY pre-tax profit guidance (£717M from £705M), despite the overall grim outlook for the rest of the UK retail space. It also adds to the positive (“things not as bad”) message from FY 2017 results end-March.
Q1 Brand Total Sales +6% easily beating +2.7% consensus and in stark contrast to yesterday’s grim BRC retail numbers (-4.2%). Even the makeup of the sales was better than expected, with Retail -4.8%, not as weak as consensus -6.1% and Online accelerating to +18%. The latter evidently helped protect against the bad weather reducing customer footfall at brick-and-mortar outlets, something that many other high street vendors (i.e. Fashion, Food, etc) pointed to.
Its rosy Q1 outlook highlights a continued trend away from brick-and-mortar toward online (now 47% of FY sales). If the majority of group sales continue coming from the online space, its competition perhaps now lies not with UK high street retailers, rather with online retail giants such as ASOS, boohoo, etc.
Once a big fish in a small retail pond, it is now putting up a good fight swimming with bigger international sharks.
Artjom Hatsaturjants, Research Analyst, 10 May 2018
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