Next's Shares Soar Over 2 Per Cent After Showing Optimism for FY22

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Summary

  • The clothing retailer’s profit dropped after the pandemic shuts down physical stores.
  • However, the firm’s net debt shrank to £610 million for FY21 and it continued to develop its online platform during the year.
  • The company’s shares were up 2.19 per cent in the morning trade hours on Thursday.

 

NEXT Plc (LON: NXT) released its financial results for the year ending 31 January 2021 today. It delivered a profit before tax of £342 million (FY20: £729 million). The retailer’s total group sales fell to £3.6 billion for the year, 17 per cent lower than the previous year’s value (FY20: £4.4 billion). Given the uncertainty around the reopening of retail shops in the UK, no final dividend was proposed for this year. The company’s share buyback programme was also suspended.

At the same time, the company displayed resilience through the pandemic due to a broad online scale (online sales accounting for more than 50 per cent of its turnover before the pandemic), a diverse product range, a strong balance sheet with decent cash resources, and a healthy retail park store portfolio which fared much better than shopping malls and city centres.

The company’s shares were trading 2.19 per cent higher at GBX 8038.00 on Thursday, 1 April at 10.15 AM.

                                                     

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Financial highlights

By carefully managing its cash reserves throughout the year, the retail firm’s net debt shrank to £610 million for FY21 (FY20: £1.1 billion). The company continued to develop its online platform, spending £121 million to strengthen its warehousing and systems during the year. Its online full price sales rose by 34 per cent for H2 2021.

The firm’s full price sales (total sales excluding VAT) were down 15 per cent last year. NEXT raised its central profit guidance to £700 million for FY22.

Acquisition of interest in Reiss

On 10 March, NEXT announced that it had agreed to a deal to take over a 25 per cent indirect interest in Reiss Limited, the affordable luxury apparel brand. Reiss had a turnover of £227.4 million in FY20.

Once the deal gets complete, NEXT said that it would be making a debt investment of £10 million and an equity investment of £33 million. The investment would be sourced from the retailer’s own cash resources. However, the terms of the deal stated that Reiss would continue to retain its management autonomy despite NEXT’s investment.

Moreover, under the deal’s terms, NEXT would be allowed to acquire an additional 26 per cent stake in Reiss after July 2022.

Stock performance

The company’s shares were trading 2.19 per cent higher at GBX 8,038.00 on Thursday, 1 April at 10.15 AM. The stock delivered a one-year return of 97.30 per cent and had a market cap of £10.46 billion at the time of reporting. The earnings per share was recorded to be 4.72 per cent.

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