- NEXT plc (LON:NXT) (OTCMKTS:NXGPY) today released a trading statement which covers sales for the thirteen weeks to 1 May 2021..
Q1 2021 hedge fund letters, conferences and more
- The shares reacted positively, rising by 1% in early trading.
- NEXT announced that sales had come in 8.5% ahead of expectations, causing them to raise guidance by £75m for the year and to lift their profit expectations by £20m to £720m.
NEXT's Growth From Online Business
Commenting on the statement, Steve Clayton, Fund Manager of the HL Select UK Shares funds said:
“Forgive the pun, but this is a NEXTraordinary result, for NEXT have trounced expectations by a country mile. Sales were well ahead of consensus, but not for the reasons expected. Growth was pretty much entirely from the online business. But it wasn’t a case of clothing sales lost from locked-down stores being recouped online. Instead the growth came from explosive demand for Homewares, Childrenswear and Overseas online demand.
Retail sales were devastated by the prolonged lockdown, but when the stores finally reopened in the last three weeks of the period, sales for those weeks jumped to 19% above their level of two years ago. But even then, most of the demand came online, where sales ran 52% ahead, compared to instore sales which were up just 2% vs 2019.
The increased guidance only accounts for the beating of expectations in NEXT’s Q1. The company have made no change to their view of likely demand in the rest of the year. That looks like an abundance of caution given the head of steam building up in NEXT online and their increasingly diverse sales base. Today’s move in the share price is basically investors reckoning that NEXT will continue to push guidance up over the rest of the year.
We hold NEXT plc on both our HL Select UK funds because it is the best placed UK retailer for the digital era. It was earning most of its money online long before anyone said “pandemic”. Management have a long track record of making the right calls and building the business for the future, well in advance. They generate cash hand over fist and reinvest to drive growth in a way that rivals can only dream of. Dividends have been on pause for a few quarters, but their return has surely been accelerated by this trading performance.”
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