(Alliance News) - Next PLC lowered annual guidance on Thursday after closing websites in Russia and Ukraine and "moderating" its growth outlook for other overseas units.
A strong showing for the financial year just gone makes the comparative for the current period even stronger, the company said. Although it noted a decent start to the year for its UK arm.
"Last year's strength contrasts with this year's unusually high level of geopolitical and economic uncertainty. The combination of these factors make accurate guidance particularly difficult," Next said.
Shares in the clothing and homewares retailer were 3.6% lower at 6,152.00 pence each in London on Thursday morning, while the wider FTSE 100 index was up 0.2%.
For the financial year that ended January 29 revenue rose 31% to GBP4.63 billion from GBP3.53 billion the year before. Pretax profit surged to GBP823.1 million from GBP342.4 million.
Compared to two years earlier, so before the onset of the pandemic, revenue was up 8.4% and pretax profit was 10% higher.
All in all, financial 2022 was better than expected, the company said.
Next explained: "Last year exceeded all our expectations. In the first quarter, during lockdown, we made up for much of the lost retail sales through online sales, particularly homeware and children's clothing. In the second half, despite stock shortages, we were able to scale up Online operations to meet pent-up demand for adult clothing. We believe that the second half performance was, in a large part, fuelled by the release of consumer savings accumulated during lockdown."
Looking ahead, however, Next's outlook is a more uncertain.
Back in January, the company said the unwinding of pandemic savings, more travel spending and inflation were concerns. Russia's invasion of Ukraine adds to the "cocktail of uncertainties", the company said.
So far this year, UK sales are ahead of where they are expected to be. Next, however, said it is difficult to draw wider conclusions due to its estate being closed in the first three months of 2021.
Due to the conflict, it has closed its websites in Ukraine and Russia, earmarking an GBP18 million annual profit hit as a result.
Next reduced its central guidance for full-year full price sales growth to 5% from 7%, amid the closure of its websites in Ukraine and Russia.
It has lowered sales guidance by GBP85 million and knocked its profit outlook by GBP10 million.
As a result, it expects annual pretax profit of GBP850 million, down from the previous GBP860 million forecast. This would still represent 3.3% growth from financial 2022.
"We enter 2022 with confidence in the outlook for our business and its ability to continue its successful evolution. The effects of the pandemic are ongoing and we remain mindful of macroeconomic and geopolitical risks, but our continued investment over many years in our people and our systems has generated strong and resilient results in the past year and we believe that it will continue to do so," said Chair Michael Roney.
Next, which had declared a 160 pence special dividend in January, affirmed plans to return to a normal dividend cycle in the current financial year. It also said any surplus cash will be returned through buybacks or more special payouts.
As per the retailer's policy, buybacks are subject to achieving a minimum rate of return of 8%. This is calculated by dividing its pretax profit forecast by its current market capitalisation. It has a current market value of around GBP8.16 billion.
By Eric Cunha; ericcunha@alliancenews.com
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Next (NXT)