Britain's Next cautions post-lockdown sales surge won't last

By James Davey

LONDON (Reuters) -British fashion retailer Next raised its full-year profit guidance for the second time in two months as it reported better than expected first-quarter trading, but cautioned it did not expect a post-lockdown surge in sales to endure.

Next, which trades from about 500 stores as well as online, said on Thursday full price sales in the 13 weeks to May 1 fell 1.5% compared with the same period two years ago - before the COVID-19 pandemic started to disrupt trading last year.

The group's previous guidance assumed first-quarter sales would tumble 10% from the same period in fiscal 2019-20. It said it had beaten this forecast by 75 million pounds ($104 million).

Full price sales in the three weeks to May 1 were up 19% versus two years ago, partly reflecting the reopening of the majority of stores on April 12 after over three months of lockdowns.

"We're not getting too excited about that because after each of the last lockdowns we did see a spike in demand that petered away after a few weeks," CEO Simon Wolfson told Reuters.

"What we're seeing at the moment is pent-up demand that I don't think is necessarily indicative of what is to come."

As a result Next did not raise its sales guidance for the rest of the year, which it kept at up 3% versus two years ago.

But it did raise its central guidance for 2021-22 pretax profit to 720 million pounds, up from the 700 million pounds forecast in April. It made 342 million pounds in 2020-21.

Shares in Next were up 2.7% at 0819 GMT, extending year-on-year gains to 80%.

Next has shown resilience during the pandemic, benefiting from its long-established online operations.

Rivals with weaker or no online business, notably Primark, have seen far larger falls in sales. Others, such as Topshop-owner Arcadia, and Debenhams have gone out of business.

Next said first-quarter sales from its stores were down 76% on two years ago, reflecting lockdowns, while online sales increased 65%.

Wolfson said the mix of products sold had started to change in recent weeks as restrictions were loosened.

He said Next had seen a significant recovery in sales of adult clothing, particularly womens' casual wear.

But sales of warm weather holiday wear, such as swimwear, remained at much lower levels that two years ago.

($1 = 0.7189 pounds)

(Reporting by James Davey; Editing by Sarah Young, Mark Potter and Kim Coghill)