Next posted a better-than-expected jump in full-year profit on Wednesday as it said selling price inflation was set to be more benign than previously thought, but warned the year ahead will be “difficult” and that it continues to expect a decline in profit.
In the year to January 2023, pre-tax profit rose 5.7% to £870.4m, coming in ahead of company guidance of £860m. Total trading sales were up 8.4% to £5.1bn, with full prices sales ahead 6.9%.
Retail sales rose 30% during the year to £1.9bn, while online sales nudged 2% lower to £3bn. Finance sales were 10% higher on the year at £274.4m.
The company said full price sales in January were flat and in line with its guidance. However, the participation of higher margin retail sales was greater than expected, adding £5m to profit.
Next reiterated its guidance for the current financial year, for sales to be down 1.5% on the year and for pre-tax profit to fall to £795m.
The retailer also said that selling price inflation is forecast to be more benign than previously thought.
“In January’s trading Statement we set out guidance for the expected increase in our selling prices for the year ahead,” it said. “We now believe price rises in the second half will be materially lower than we initially feared.”
Next said two factors had served to reduce pressure on pricing. The first is a significant reduction in the costs of container freight as shipping capacities return to normal. The second is improving factory gate prices, resulting from the increased availability of factory capacity.
Like-for-like price inflation in Spring/Summer is expected to be 7% and 3% for Autumn/Winter, down from previous guidance of 8% and 6% respectively.
Next also warned on Wednesday that the year ahead was set to be “challenging”.
“The combination of inflation in our cost base and top line sales which are likely to edge backwards is uncomfortable,” it said. “But the company is well prepared. If we achieve our guidance, a moderate sales decline will result in a pre-tax profit of £795m, strong cash flow and underlying net margins of around 15%.”
