Next has hiked its profit forecast for the second time in two months amid signs of a recovery in consumer confidence and “reopening euphoria” on the high street.
The UK clothing and homewares chain nudged its profit guidance up by £20m to £720m, following on from April’s £30m upgrade. The retailer smashed its sales target by £75m in 13 weeks to 1 May with the easing of the lockdown in April resulting in three huge weeks for its stores and website, with sales nearly 20% up on 2019.
The easing of restrictions unleashed the pent-up demand for clothing that had built up over the previous three months, said Simon Wolfson, the Next chief executive. Sales would settle down over the next few weeks, he predicted, but the post-lockdown surge pointed to encouraging levels of consumer confidence.
“I don’t think we’d have seen anything like this spike if people didn’t have the money or if they were very worried about the future,” said Lord Wolfson.
Next’s first quarter sales finished down 1.5% on 2019 – rather than declining by the 10% it had expected. Online sales jumped 63% as Next became the UK’s biggest internet clothing retailer – ahead of rivals such as Asos and Boohoo.
The lockdown had a huge impact on sales as the return to working from home, coupled with the closure of its stores, meant demand for its women’s and men’s clothing ranges slumped 46%. However, in keeping with the trends seen over the past year, demand for childrenswear held firm while sales of homewares jumped 12% as locked-down Britons continued to spruce up their living spaces.
The update from Next came as a survey of mid-sized clothing, lifestyle and homeware chains reported “record” sales in April. The monthly sales tracker produced by the advisory firm BDO said it had been a “euphoric” reopening period for non-essential retailers who had been hard hit by store closures amid the pandemic.
Total sales, both in store and online, increased sixfold in April albeit against last year’s devastating 30% drop when stores were ordered to shut. Within that, fashion sales were up 84% as shoppers refreshed their wardrobes ahead of visits to pub gardens and restaurants.
The strong sales showed a “shift in the consumer mindset”, said Sophie Michael, the head of retail and wholesale at BDO, with “pent-up demand and renewed confidence providing a euphoric reopening for the high street”.
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“We don’t know, however, if this euphoria will last and if sustained confidence around personal finances will continue to prop up spending or fade as restrictions ease and ‘normality’ resumes,” she added. “Retailers will be hoping that the easing of restrictions on 21 June will unleash a further wave of consumer spending.”
Separate figures showed that despite the bumper sales picture the number of shoppers actually visiting high streets and shopping malls remains much lower than before the pandemic. In April, footfall remained 40% down on 2019 levels, according to the British Retail Consortium (BRC), although this was an improvement on March.
High streets would take time to recover, said Helen Dickinson, the BRC’s chief executive, with rising consumer demand and footfall “vital for the survival of many retailers as they start to see costs increasing as stores reopen and colleagues return from furlough”.
