MARKET REPORT: Next shares soar as profit forecast is raised to £800m

MARKET REPORT: Next shares hit an all-time high as profit forecast is raised to £800m despite rising costs and staff shortages

Next shares hit an all-time high as it predicted its highest annual profits since 2016, despite grappling with cost pressures and staff shortages.

Britain’s biggest fashion retailer raised its forecasts for the fourth time this year – saying it now expects pre-tax profits in the 12 months to January 2022 of £800million.

That is £36million higher than its previous guidance of £764million and the largest haul since 2016.

Britain¿s biggest fashion retailer Next has raised its forecasts for the fourth time this year - saying it now expects pre-tax profits in the 12 months to January 2022 of £800m

Britain’s biggest fashion retailer Next has raised its forecasts for the fourth time this year – saying it now expects pre-tax profits in the 12 months to January 2022 of £800m

However, Next raised several red flags, including potential staff shortages this Christmas.

The chaos in global shipping has also forced it to increase prices by 6 per cent for homeware such as cushions and curtains, while clothing prices rose by 1 per cent.

Next sales rose 5.2 per cent in the six months to the end of July to £2.1billion, compared to 2019 levels, and profits rose 5.9 per cent to £347million.

The chain, which has around 550 UK stores, boomed over summer with sales up a fifth in the last eight weeks compared to the same period in 2019.

Stock Watch – Quiz 

Fashion brand Quiz saw nearly a quarter of its value wiped out as store closures during the pandemic caused its losses to treble.

For the year to the end of March, the business reported a loss of £9.6million, wider than the £3.1million loss in the same period a year ago, while the company’s revenues tumbled to £39million from £118million.

The company also flagged that its profit margins had shrunk by nearly 7 percentage points as coronavirus lockdown measures forced it to slash prices.

Quiz shares tumbled 20.3 per cent, or 4.95p, to 19.45p in the wake of the results.

Online sales jumped by more than half to £1.5billion, more than making up for shops which saw a 38 per cent fall in sales to £540million amid low footfall.

A Next spokesman said: ‘When stores opened in mid-April, the Retail bounce-back was far stronger than we anticipated. 

‘Sales in Retail stores have done better than planned, while online sales have fallen back less than we expected. It appears that the wider economy has not suffered the long-term damage many feared, for the moment at least.’

But the spokesman added that the glut of household savings will subside as international travel reopens, with a cost of living crisis also hitting demand.

Investors appeared to shrug off the worries, with Next shares rising 3.9 per cent, or 314p, to 8394p. The FTSE 100 climbed 1.1 per cent, or 80.06 points to 7108.16 while the mid-cap FTSE 250 added 0.1 per cent, or 21.87 points, to 23150.97.

Signs that the UK’s fuel crisis is receding appeared to have soothed investor nerves, while news that Chinese property firm Evergrande had raked in £1.1billion by selling its stake in a commercial bank kicked its looming debt crisis further down the road.

Royal Mail was the biggest FTSE 100 faller after analysts at UBS double-downgraded the firm to ‘sell’ from ‘buy’ and warned a cocktail of inflation, rising costs and worker shortages will hit the firm’s UK business.

In a note, the Swiss bank flagged up data that showed salary rises of over 30 per cent for the company’s temporary workers, which they said illustrated ‘labour shortages and wage inflation’ ahead of the crucial Christmas delivery period.

Analysts also said the planned rise in National Insurance will add around £50million to Royal Mail’s costs next year, with higher gas and electricity prices expected to add another £20million-£30million. 

The shares were down 8.8 per cent, or 42.2p, at 437p. Meanwhile, pharma giant AstraZeneca topped the blue-chip risers, climbing 4.2 per cent, or 359p, at 8833p after agreeing to take full control of New Jersey-based Caelum Biosciences for £112million. 

Caelum is developing CAEL-101, a potential treatment for AL amyloidosis, a rare disease that can cause organ failure and death with a survival rate of less than 18 months.

Online auction specialist Auction Technology Group (ATG) inched up 0.5 per cent, or 6p, at 1300p as UK competition regulators approved its acquisition of North American arts and antique auction website Live Auctioneers.

ATG said the £391million purchase, initially announced in June, will add 1,600 auctioneers and 120,000 bidders to its network.

Gold, copper and silver miner Anglo Asian was a bright spot after securing another 340 sq miles of land in Azerbaijan. 

The company said the new plots contain the Garadagh deposit, which contains over 300,000 tonnes of copper worth £2.2billion at current prices. Shares bounced 1.9 per cent, or 2.5p, to 132.5p.

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