Next has published a trading statement, advising of ‘better than expected trading’ amid the coronavirus pandemic.
● Full price sales in the second quarter were down -28% against last year. This is much better than we expected and an improvement on the best-case scenario given in our April Trading Statement.
● Online warehouse picking and despatch capacity is now back at normal levels and UK and Eire stores are now open.
● Full year profit before tax, based on our new central sales scenario, is now estimated at £195m
● New central scenario year end net debt is forecast to reduce by c.£460m.
As the pandemic retreats, and we learn to operate in a socially distanced world, we are beginning to better understand both consumer demand and how the Company’s finances will be affected this year. The key points are:
Warehouse capacity has come back faster than we had planned, and store sales have been more robust than anticipated. As a result, our second quarter sales have been significantly ahead of our internal plan. Online sales in the second quarter were up +9% and like-for-like sales in Retail stores, since they re-opened, were down -32%.
New Stress Test Scenarios
We have modelled three new scenarios based on full price sales for the full year being down -18%, -26% and -33%, see page 7 (full report here). The central -26% scenario is in line with our internal forecast and assumes that sales in the second half are down -19%.
The Company’s cash resources have been enhanced through a combination of asset sales and the suspension of dividends and share buybacks. These measures, along with the cash we anticipate generating from operations, mean that year end net debt is likely to fall significantly.
Based on our central scenario, year end net debt will fall by c.£460m to £650m, which is comfortably within the Company’s cash resources of £1.6bn2 and represents 65% of the value of forecast year end nextpay receivables of £1bn.
At our central scenario, we estimate that full year profit before tax will be £195m.
There is still much that remains uncertain and our central scenario cannot be accorded the same degree of confidence that our guidance would normally receive at this time of year. The duration of social distancing rules, post-lockdown consumer behaviour, earnings, unemployment, and, most importantly, whether there will be a second wave lockdown, all remain unknowable.
Nonetheless, our experience over the last 13 weeks has given us much greater clarity on our Online capabilities during lockdown and the state of consumer demand, and we are now more optimistic about the outlook for the full year than we were at the height of the pandemic.
See the full trading update here.
Source : Insight DIY & Next