Next shares surge as online sales limit pandemic pain

By Paul Sandle

LONDON (Reuters) -British fashion retailer Next soundly beat its forecast for Christmas sales despite COVID-19 lockdowns closing stores in November and the final shopping days of December, resulting in another upgrade to underlying profit guidance.

Shares in the company rose as much as 9% to a five-year high of 75.22 pounds in early Tuesday trade.

Next, which has seen increased demand for children's clothes and leisure wear during the pandemic, said full-price sales fell 1.1% in the nine weeks to Dec. 26 on last year, beating its central guidance of an 8% drop given in October.

Chief Executive Simon Wolfson said its online operations had coped with a spike in demand as more than half of the sales that would have been made in store in November migrated online.

"We were surprised that the business did as well as it did despite the November lockdown," he said in an interview. "Our operations kept up with demand, which was something we were anxious about in October."

The company has repeatedly upgraded forecasts since the start of the pandemic. In April it predicted a 35% drop in full-year sales and zero pretax profit, whereas now it sees a 16% drop in sales and underlying pretax profit of 370 million pounds.

Next, the first major UK listed non-food retailer to update on Christmas trading, has benefited from its long-established online operation, which recorded a 38% rise in full-price sales in the fourth quarter up until Dec. 26.

Rivals with weaker or no online operation, notably AB Food's Primark, have seen far larger drops in sales.

Next's latest upgrade is its fourth in five months, although two one-offs - a 40-million-pound provision on the value of store leases and a 12-million-pound boost from an additional week of trading - result in new pretax profit guidance of 342 million pounds for the year to the end of January.

It anticipated a 14% loss of full-price retail sales in January due to a third national lockdown in England.

Wolfson said about half of lost store sales would migrate online in the new lockdown, which will span the end of its current year and the start of its next.

"That may be ambitious," he said, although he added that its warehouses were now COVID secure. "We are better positioned to deal with this lockdown than the first one."

For its 2021/22 financial year, its central scenario which sees disruption in the first half and a recovery in the second, is for sales on a par with its 2019/20 year, and pretax profit of 670 million pounds.

($1 = 0.7358 pounds)

(Reporting by Paul Sandle; Editing by Kate Holton, Mark Potter and Pravin Char)