Next targeting earnings rebound from Irish and UK retail lockdowns

Chief executive of the clothing retailer expects a 'combination of pent-up demand along with a healthy overall increase in personal savings will serve to keep the consumer economy moving forward'

Fashion retailer Next is confident of a return to growth this year after shop closures due to Covid restrictions in Ireland and the UK halved profits in 2020.

Shares in high-street clothing retailer Next jumped by more than 3% after it expressed confidence in generating a significant rebound in earnings and sales this year following a battering from having its shops in the UK and Ireland closed for large periods during Covid restrictions last year.

The retailer – which has 40 shops on the island of Ireland, evenly split between the Republic and the North – remained profitable last year, but Covid restrictions across its main markets saw those profits fall 53% to £342m (€401m).

Group sales, for the 12 months to the end of January, tumbled by 17% to just over £3.6bn.

The company doesn’t break out figures for its Irish operations – which are combined with overall online sales figures and its UK shop numbers – but it did report a 10% surge in online sales last year to £2.4bn.

Next said it expected consumers to continue shifting towards online sales “for some time”, with continued development of its online sales platform remaining a priority.

That could see it gain traction in Ireland. 

Figures published this week by the CSO show retail sales here jumped 14% – in volume terms – on a monthly basis in February, heavily driven by a 13% jump in online sales, as most retailers’ shops remained shut. 

Sales were down 3.2%, year-on-year, but the monthly online growth followed an 11% rise in January.

Simon Wolfson, Next’s chief executive, said his best guess was that the consumer economy, at least in the short term, would be healthier than many presume.

“It seems likely that a combination of pent-up demand along with a healthy overall increase in personal savings will serve to keep the consumer economy moving forward,” he said.

He expects an immediate pick-up in trade in Next’s core market of the UK when, as per Boris Johnson’s roadmap out of Britain’s lockdown, non-essential shops reopen in England on April 12.

“There was definitely a bounce at the end of the lockdown last year and I would be surprised if the same thing didn’t happen again,” Mr Wolfson said.

But he said there was a big question mark over the level of store sales in the longer term.

• additional reporting Reuters