The king of beatable guidance Next PLC is set to release its full-year preliminary results on Thursday, with the clothing retailer having upped its full-year guidance in January.
Profit before tax guidance was raised by £22mln to £822mln for the year to end January, with long-time investors likely to be confident the company will be able to reach or beat that guidance.
Meeting the target would represent a 9.8% increase over the past two years.
The FTSE 100-listed company, which is led by Simon Wolfson (aka Baron Wolfson of Aspley Guise) and is a bellwether for the clothing retail sector, pointed out in its statement that economic uncertainties would impact its forecast for the upcoming year, and that was before Russia invaded Ukraine.
There were five areas that Next said would make forecasting sales for 2022 difficult, including the possibility that the buoyancy of the last nine months, “the result of pent-up demand combined with the spending over savings” during lockdowns, may reverse.
Renewed spending on travel and leisure following the easing of pandemic rules may also depress demand for discretionary goods, Wolfson suggested, while inflation of essential goods and clothing could force consumers to think twice about where they are spending their money.
The board was also concerned about tax and interest rate hikes, with three Bank of England hikes having been made since the start of the year.
Next’s shares were down by 15% even before the war in Ukraine, after hitting an all-time high in December.
"The share price slide reflects concerns over possible supply chain disruption and input cost and wage increases on margins and also the effect of inflation, higher fuel and energy prices and higher interest rates upon consumer confidence and shoppers’ willingness and ability to spend," said analysts at AJ Bell.
They said the "real key" in Thursday's results will be any update Wolfson provides on guidance for the current year, where his initial steer was for 7% full-price sale growth and a 5% increase in pre-tax profits to £860mln.
Comments from the Baron on input cost inflation and pricing will also be closely watched, with Next having flagged a 5.4% increase in its wage bill for the year just ended, which it balanced by increasing prices for its clothes 3.7% for spring/summer last year and 6% for the autumn/winter collection.
Broker Peel Hunt said: "We remain fairly bullish on the outlook for apparel markets, with consumers already pivoting back to ‘normal’, with clear clothing demand for work, social occasions and travel.
"We suspect the year has started well, with a late (and hopefully warm) Easter also likely to benefit clothing sales. Of course, this comes before the full impact of tax rises and energy cost inflation on the consumer, which is likely to weigh more heavily thorough autumn and into 2023E, with prices for autumn/winter also likely to be under further pressure from rising costs."
Analysts and shareholders will also, added the AJ Bell team, look out for an update on the plans to return what Next terms excess cash to investors.
Next paid out 110p a share in September and then a higher-than-expected 160p a share at the end of January.