Next Plc has revealed the big hit it expects to take from shutting down operations in Russia and Ukraine.
The high street fashion and homewares chain said it will lose sales of around £85 million this financial year from closing its websites in the two countries.
It said the war will knock £18 million off its profits, but said that strong UK trade will partially offset that.
The Leicestershire-based retailer said earlier this month that it was winding down its Russian distribution site following Putin’s invasion of Ukraine.
It has downgraded profit targets by £10 million as a result of the conflict but said it still expects a 5 per cent increase in sales for the year. Profits, it said, were set to rise by 3.3 per cent to £850 million over the next 12 months.
It comes as the business said pre-tax profits jumped 140 per cent to £823 million for the year to January, compared with the previous year – which was heavily impacted by Covid – with profits also 10 per cent above pre-pandemic levels.
Next said this was buoyed by a 12.8 per cent increase in brand full price sales for the year against pre-pandemic levels.
Total sales for the year were up 11.5 per cent at almost £4.862 billion.
The FTSE 100 company said UK sales were “ahead of where we expected them to be” for the past three months of the current year, after a strong return back to shops.
It also highlighted a “very sharp reversal” in lockdown fashion trends, as formal clothing recovered and spending on home and very casual clothing fell back.
Next chairman Michael Roney said: “We enter 2022 with confidence in the outlook for our business and its ability to continue its successful evolution.
“The effects of the pandemic are ongoing and we remain mindful of macroeconomic and geopolitical risks, but our continued investment over many years in our people and our systems has generated strong and resilient results in the past year and we believe that it will continue to do so.”
Russ Mould, investment director at big online stockbroker AJ Bell, said it was a pleasant surprise that Next had lifted guidance for likely sales from UK shops, given the direction of travel for UK retail.
He said the business was enjoying significant success on the back of consumers splashing the cash they saved during Covid lockdowns, and it seemed inevitable the coming months could be more challenging given inflationary pressures and household bills becoming much higher.
He said: “Recent sales trends have seen consumers smarten up their appearance perhaps as more people are called back to work in the office. This dynamic could play out for a bit longer as this is arguably non-discretionary spend.
“But as we move towards summer, there is a high chance that consumers will be looking for ways to reduce their non-essential spending and so buying outfits for holidays and parties might become less frequent.
“Next’s management will be fully aware of this risk, but their focus is always on the longer term. There will always be ups and downs with sales patterns and the company has form in being able to think on its feet and move with the times.
“It benefited from having an established and efficient online operation when Covid first struck, now it is benefiting from offering a broad range of third-party products which make its website a one-stop-shop for fashion fans."
