Next joins Zara and H&M in lifting the Covid-19 retail gloom       

Next has raised its outlook twice since the height of the pandemic. In April, the retailer’s worst-case scenario was a loss of £150m and its midpoint was for no earnings. In July, it upgraded the outlook after stores reopened.

Next raised its outlook for a second time since coronavirus lockdowns shut its stores, joining fashion chains Zara and H&M in reporting better-than-expected recoveries.

The retailer now expects a pretax profit of £300m for the year, higher than the midpoint of the company’s previous forecast of £195m. 

Next has raised its outlook twice since the height of the pandemic. In April, the retailer’s worst-case scenario was a loss of £150m and its midpoint was for no earnings. In July, it upgraded the outlook after stores reopened.

The shares rose 3.5% in the session but have lost around 10% since the start of the year.

Sales through the pandemic have been more resilient than expected as the cooler weather in August prompted the purchase of heavier autumn clothing, Next said. 

A decline in overseas vacations as Britain imposed quarantines on travelers returning from many countries also boosted domestic clothing sales.

Next cautioned that robust sales in the 13 weeks since its stores reopened may not continue. 

It said the end of the UK government’s wage support programme next month and a resurgent pandemic could hit demand again. 

It added that a new UK rule limiting social gatherings to six people could depress demand for gifts.

Although Next currently expects its full-price sales to be down 12% for the year, the drop could be as big as 34% in a “downside scenario if we experience more widespread lockdown measures and store closures,” the company said. 

Because of the uncertainty, the company said it won’t pay an interim dividend.

Next’s update comes after Spanish retailer Inditex, the owner of Zara, also buoyed the market, reporting another quarter of steady improvement. 

Sweden’s Hennes & Mauritz (H&M) surprised with a stronger-than-expected return to profit.

The news was a lot grimmer for Britain’s John Lewis Partnership. 

It has vowed to bounce back from the Covid crisis, even as it plunged deeper into the red, wrote down the value of its stores by £470m and scrapped its annual staff bonus for the first time since 1953.

Sharon White, chairman of the department stores and supermarkets group, told reporters that staff - or partners as the group calls them - should not expect a bonus next year either, but that the business would survive.

“The partnership found itself in a similar position in 1948 when the bonus was halted (for five years) following the Second World War. We came through then to be even stronger than before and we will do so again,” she said.

The Covid-19 pandemic has destroyed many retailers in Britain that were already struggling with high rents and taxes. The partnership made a first-half loss of £635m. 

The impairment charge reflects a rapid change in consumer behaviour during the pandemic, which has accelerated a shift away from shopping in stores to buying online. 

- Bloomberg and Reuters