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Next lifts profit view again as recovery builds

09/17/2020 | 07:29am

British clothing retailer Next raised its profit outlook for the second time in two months as it reported strong recent trading, helped by cooler weather and shoppers having more spare cash because they aren't spending on foreign holidays.

Shares in Next were 2.3% higher at 0935 GMT as it followed the positive trend set this week by H&M and Inditex, the owner of Zara, as retailers start to recover from the mass closure of shops caused by coronavirus lockdowns.

"Even in the event of another (national) lockdown it looks like the company will still make a significant profit and still reduce its year-end debt," Next Chief Executive Simon Wolfson told Reuters.

What Next calls its central guidance now assumes a pretax profit of 300 million pounds in the year to the end of January 2021. That is up from its view in July of 195 million pounds but less than half the 729 million made in 2019-20.

Inditex, the world's largest clothing retailer, said on Wednesday it had returned to quarterly profit in the May to July quarter and that current trade showed a progressive return to normality.

H&M on Tuesday beat quarterly profit forecasts, helped by more full-price sales and strong cost control.

SALES GROWTH TO SLOW

Next, which trades from about 500 stores in the UK and Ireland, as well as 184 overseas outlets, and its Directory online business, said full-price sales in the last seven weeks were up 4% year-on-year.

Next, which does more than half of its business online, does not expect to sustain that growth. Its central scenario assumes that sales will be down 12% for the rest of the year.

That factors in the end of the UK government's furlough job support scheme in October, colder weather worsening the effects of the pandemic and tightened social distancing rules depressing demand for gifts and clothing associated with traditional Christmas family gatherings.

The group forecast a 462 million pound reduction in net debt for the current financial year and Wolfson said it was looking for more small acquisition opportunities thrown up by the crisis.

The impact of coronavirus was stark in the six months to the end of July, when Next reported profit of only 9 million pounds, with full price sales down 33%.

(Reporting by James Davey; Editing by Simon Cameron-Moore and Mark Potter)

By James Davey

© Thomson Reuters 2020
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