Store Expansion and Housing Market boost Next Profits

Posted on 12 September, 2014 by Kirsten Kennedy

Next has become one of the dominant retailers of the high street, with its fashion forward lines attracting consumers and allowing it to finally overtake key rival Marks & Spencer. And it appears that this winning streak is set to continue, as it has now managed to report its strongest half year growth for a number of years.

Store-Expansion-and-Housing-Market-boost-Next-Profits

The UK’s second largest clothing retailer posted a 10.3 per cent rise in half year revenues, with the total earned in the past six months reaching an impressive £1.85 billion. In turn, this boosted its pre-tax profit for the period by 19.3 per cent to £324.2 million.

Part of the clothing chain’s success was due to expansion, as Next took on an additional 100,000 sq ft of retail space. This was due to the retailer’s decision to alter its strategy, with large format stores in out of town retail parks becoming preferable to the ‘shed format’ properties it usually occupies on the high street.

This allowed the traditional retailing aspect of the business to contribute more to overall revenues than domestic Next Directory sales – the first time this has happened in several years. However, when the impact of overseas sales is taken into account, the online and catalogue business remains the largest source of revenue growth, with the number of active customers in the Next Directory increasing 8.9 per cent year on year to 3.9 million.

Chief executive Lord Wolfson praised the performance of the brand, attributing an improving consumer climate and the ongoing economic recovery to its achievements.

He said; “An improving economy, low interest rates, increasing availability of credit, less general discounting on the high street and much better summer weather have, we believe, all contributed to an improvement in our sales performance.

“In addition, an improved housing market has helped our Home business.

“We remain mindful that some of these factors are likely to be less favourable next year and this year’s fine summer weather could present tough comparatives next year, when interest rates are also expected to rise.”

As a result of the strong performance during the first half, Next now expects full year pre-tax profits to rise by between 11 per cent and 17 per cent, meaning that this aspect could potentially break the £800 million barrier for the first time in the chain’s history. However, it has warned that fourth quarter sales may seem disappointing and could rise by as little as 4 per cent, given that the comparative for the Christmas period will be very tough when compared to last year’s stellar performance.

Looking forward, Next will continue to invest in both its online and bricks and mortar operations, focusing particularly on growth of large stores in out of town retail parks. It seems that, finally, the high street “underdog” will be able to establish itself as a true competitive force – leading many to question the future of its main rival Marks & Spencer.




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