Leading retailer Next has released its Q1 trading statement, revealing that despite a slight dip in sales, the results exceeded expectations considering the challenging trading environment. In the 13-week period ending in April, full-price sales decreased by only 0.7%, compared to the previous year. This positive outcome is particularly noteworthy as Next had expected a decline of up to 2%.

It’s worth mentioning that Next tends to approach its guidance with caution. The company is maintaining its current profit forecast for the full year, projecting a pre-tax profit of £795 million and earnings per share of 501.9p.

Digging deeper into the performance, Next saw a significant boost from strong finance interest income. Although the Online division saw a 1.6% decline in full-price sales, and Retail sales dropped by 0.6%, finance interest income increased by 7.4%. As a result, total full-price sales for Online and Retail combined only decreased by 1.2%, with the help of the finance boost mitigating the decline.

Next also revealed that total trading sales, taking into account general markdowns and the impact of its seasonal Clearance event, increased by 1.2% compared to the previous year. However, these figures do not include sales through Total Platform and Joules. Last year, Next faced stock shortages leading up to Christmas, which resulted in limited inventory available for the Clearance event. This year, however, the company has confirmed that Clearance stock levels have returned to normal, aligning with pre-Covid levels.

Despite the challenging conditions in the retail industry, Next’s performance remains relatively successful. Nevertheless, the company has decided not to upgrade its guidance at this time, maintaining its cautious stance. Next stated that it is too early in the year to revise sales expectations for the half or full year, even though its first-quarter performance exceeded initial sales guidance.

To support its cautious approach, Next has adjusted its Q2 sales guidance from a projected decline of 4% to a decline of 5%. The company believes that some of the success seen in the first quarter, particularly in holiday clothing sales leading up to Easter, may have been pulled forward from the second quarter. It also pointed out that the second quarter of last year benefited from unusually warm weather and pent-up demand for events like weddings and proms. Therefore, Next’s cautious stance seems justified.

The big question now is whether Next’s caution will prove warranted, or if a sunny summer will encourage UK consumers to purchase more fashion products. The next update from Next is scheduled for August 3rd, when the company will provide insights into its performance in the coming months.

Useful links:
1. Next Official Website
2. Understanding Earnings Per Share