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Next on the up as stock goes into descent

”Retailers are spinning a lot of plates right now, but stock management is arguably the most important."

National Express -

Next PLC’s (LON:NEX) said its recovery during the second quarter had been stronger than expected, leading to a raft of upgrades today.

The clothing retailer said its middle case estimate for a decline in sales of 26% will now result in profits £195mln and net debt of £650mln, both of which are around £200mln better than the previous estimate, said broker Peel Hunt.

Full price sales for the past six weeks were down 8%, with controls over stock levels working as inventory in the end of season sale was only up 1%.

Warehouse capacity is now back up to match demand levels, with cut-off for next day delivery at 8pm and expected to move out to 10pm before peak.

Peel Hunt upgraded its forecasts to the following year after the update where it sees Next as having the potential to make £600mln plus of profits with a return to dividends likely.

Sophie Lund-Yates, at Hargreaves Lansdown added: ” Retailers are spinning a lot of plates right now, but stock management is arguably the most important.

 “Piles of unsold items can ultimately act as a drag on gross margins and cash flow. Next customers can also look forward to the fact that £150mln worth of this summer’s stock is simply being brought out next year.

“The other major bugbear for shops these days is a high volume of returns. These also eat into margins and profits, but lockdowns meant Next customers were holding onto what they’d bought more than usual.

“That’s because things like loungewear tends to be returned less often anyway, as well as the fact people were less inclined to leave their homes to sort out a return.

“In an ideal world, this will be a trend the wider sector has enjoyed, which would be a welcome helping hand to those already struggling with paper-thin margins.”

Next shares rose 8% to 5,696p.

Quick facts: National Express

Price: 153.2 GBX

LSE:NEX
Market: LSE
Market Cap: £940.78 m
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