UK Online Retailers Deliver Upbeat Results

UK online retailers reported positive results, reinforcing the ongoing trend of British consumers seeking good value while remaining willing to purchase goods.​

Next Raises Full-Year Guidance

A key takeaway from the earnings reported by Next before the opening of the market on Thursday was the increase in full-year guidance, which sets the company on track to achieve almost £1 billion in profits this year. The company reported sales growth of 8% over the last year, reaching £2.95 billion, while EPS hit 282.8p, a 6.2% increase. The company projects sales growth will slow to 3.7% in the second half after an extraordinarily strong start to the year, though, led by growth in overseas brand sales, despite cooler weather impacting summer sales in its home market. Still, Next expects profits to rise at an even faster rate of 8.4% for the full year, with pre-tax earnings projected to reach £995 million, up from the previous guidance of £980 million.

Following the results, the company's share price jumped 5.5% to hit a record high of £110.85, contributing to around a 50% gain so far this year but reversed at the high on profit-taking. Investors welcomed comments that the autumn/winter season is off to a strong start, allowing the company to upgrade its second-half sales growth forecast to 3.7% from the previous 2.5%. The company's performance contrasts with other UK retailers that have blamed a tough environment for weaker sales growth. However, the company's leadership did acknowledge that better weather in continental Europe contributed to the company's solid performance.​

Ocado Expands its Customer Base

The British online grocer saw strong early performance following its earnings release, with shares initially rising 17% at market open and settling at a more modest 6.4% increase after a few hours of trading. Retail revenue grew 15.5% year-on-year (YOY) to £658 million on a similar sales volume. The average basket value remained largely unchanged, with a slightly lower average selling price, indicating growth came from surpassing 1 million active customers and continued expansion. A focus on value appears to attract shoppers.

The company upgraded its guidance, now forecasting annual sales growth in the low double digits compared to previous mid-high single digits, though it kept its core earnings outlook. CEO Hannah Gibson acknowledged growth mainly stems from attracting new customers through extensive selection and competitive prices. The average selling price was slightly down compared to the broader UK grocery sector, which saw inflation of around 2% over the same period.​

Next Reached Measured-Move Projection at Record High

Next faces an important test at the £100 support level following a sharp drop from recent record highs. A break below could lead to further declines towards £95 and potentially the swing low of £86. Notably, the price spike had reached the projected move based on the earlier leg up from £33 to £85, adding to the chances of a short-term pullback. However, if Next moves back above records, this could provide the potential for a rise to the £115 to £120 area as the stock tests new high ground.​

Key Takeaways

UK online retailers reported positive results, reinforcing consumer willingness to purchase goods despite seeking value. Next raised full-year guidance to almost £1 billion in profits due to 8% sales growth to £2.95 billion and 6.2% EPS growth. Ocado upgraded guidance on 15.5% retail revenue growth to £658 million and surpassed 1 million active customers through extensive selection and competitive prices.