Despite highlighting a potential coronavirus-led £1bn hit to sales, retailer Next (NXT) reversed earlier losses to top the FTSE 100 with a 7.8% advance to £41.53.

Investors apparently see the company as better placed than many of its counterparts to weather the current storm. The shares have already fallen sharply as market fears over the current health crisis have escalated.

According to its results for the year ending January 2020, pre-tax profit was up 0.8% on last year, driven by better than expected full price sales in January. Next brand full price sales were up 4%, and Brand total sales, including markdowns, increased 3.5%.

Online sales were the largest contributor to the boost, generating £2.15bn in total sales. When compared up 11.9% year-on-year.

Retail sales, however, came under pressure during the period, falling 5.3% when compared to the previous year. These figures, were slightly ahead of expectations but obviously have limited relevance to current trading conditions.


Shore Capital analyst Greg Lawless said: ‘Next remains a well manged company with a tight grip on the business, particularly with strong cash and stock control and good cash generation.’

AJ Bell investment director Russ Mould noted: ‘Stress tests are normally the domain of banks to prove they could survive a sharp economic downturn. Now this practice is likely to become commonplace across many other sectors as companies seek to prove to investors that they have adequate strength to survive the coronavirus pandemic.

‘Next’s stress test accompanies its full year results and shows that it can sustain more than a £1bn loss of annual full price sales without exceeding its current borrowing facilities. That’s very impressive and a credit to the financial strength of the business which was already facing a retail sector crisis before the current pandemic took hold.’

Mould added: ‘It will be interesting to see if widespread home working results in stronger online orders. This is certainly not a given as there will be a lot of people worried about their jobs and whom may not be confident enough to spend money on clothes.

‘There is also the consideration that people won’t be going out so they don’t need to buy new shirts or dresses to look smart. Any old clothes may suffice if you’re stuck indoors.’


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Issue Date: 19 Mar 2020