Next, the British retailer of clothing, footwear and home products, anticipates a strong rebound in profits in the financial year ending in January 2022, as full price sales return to the levels posted in the financial year that finished in January 2020.

The company reported that full price sales in the nine weeks to Dec. 26 were down by 1.1 percent on last year. This is a sharp improvement with its central guidance of an 8 percent decline, given in its October trading statement. During the nine-week period, online sales were up by 38 percent and physical retail sales dropped by 43 percent.

During the fourth quarter, Next stressed that the products that performed well were childrenswear, home products, loungewear and sportswear, while the categories that “did badly” were adult clothing for work, parties, events and going out. Sales were affected by the Covid-19 pandemic which has forced people to work remotely from home and restricted their social lives.

During the quarter, returns continued to be lower than in the previous year, falling to 21 percent from 36 percent. It highlighted that two thirds of the decline was due to an improved product mixed and the remainder to clients being more selective when placing their initial orders.

It noted that stores in retail parks situated out of town continued to perform about 15 percent better than shops in city centers and malls. 

In the current financial year, that ends in January, Next now expects profit before tax to be £370 million (€408.8m-$502.1m) before taking into account two non-recurring items. The company anticipates a non-recurring profit of £12 million (€13.3m-$16.3m) from a 53rd trading week, and an additional property provision of £40 million (€44.2-$54.2m), resulting in a full-year profit before tax forecast of £342 million (€337.1m-$464.1m).

Next expects net debt to reduce by £487 million (€538.1m-$660.8m) to £625 million (€690.6m-$848.1m) by the end of the financial year.

For the 2021/22 financial year, the company’s central guidance, which assumes stores will be closed in February and March, set profit before tax at £670 million (€740.3m-$909.1m).