High street fashion retailer Next has today reported a nine per cent rise in pre-tax profit to £622 million in its full year, despite sales for the first few weeks of this year sitting at the bottom of its target range.
CEO of Next Lord Wolfson explained:” The first few weeks of the year have been quiet and serve to reinforce a more cautious approach.
“At present, sales are at the bottom of our target range, though we expect this situation to improve.
“We will get a better understanding of the underlying consumer environment once temperatures return to seasonal levels.”
While overall retail sales flatlined at £2.19 billion in the year to January 2013, online sales thrived as Next Directory reported a sales increase of 9.5 per cent to £1.2 billion, noting in a statement the growing synergy between the online and bricks & mortar businesses.
Next’s blossoming omnichannel approach is key to its success, explained Research Director at analyst firm Conlumino Matt Piner.
“With another strong year in the bag, Next’s attention is very much on getting the right mix between stores and online – one of the crucial factors in its recent success,” Piner said.
“Although Directory continued to drive growth in 2012/13, with sales up 9.5 per cent compared to flat sales through the physical business, the gap is narrowing and the portfolio remains largely profitable, with 89 per cent of revenue coming from stores that deliver a more than 15 per cent profit contribution on sales.
“Moreover, stores and online continue to become increasingly inter-dependant; for example, over 20 per cent of Directory sales are delivered through stores and over 60 per cent of returns come back that way.
“Consequently, although uneconomic stores will be closed where possible, overall the retailer remains on the expansion trail.”
During the year, the retailer added 250,000 sq ft to its store portfolio, though this was slightly below expectations due to a fire at one of its sites and issues surrounding planning permission, and Wolfson noted that planning remains a problem for the business.
“We are actively working with planning officers, councillors and local communities to deliver new shops, investment and jobs,” Wolfson said.
“In our dealing with local councils it is noticeable that some are much more pro-growth and pro-jobs than others.
“Many local councils are enthusiastic and efficient; but a few remain an unhealthy mix of Luddite intransigence and incompetence.
“Going forward, in areas where councils traditionally have got away with just saying “no”, we will be more active in harnessing the law and the full weight of public opinion to campaign for growth.
“Next year we expect to add at least 250,000 sq. ft. of trading space.”
The council played a role in scaling back the retailer’s growth plans and Piner warned that working together is crucial to kick-start the economy.
“Retail is being re-shaped and the role of stores is changing,” Piner said.
“Unfortunately this is taking place during one of the worst economic environments in centuries, making it an especially painful process.
“It is therefore disappointing that retailers feel like they are having to fight against councils rather than working alongside them for the best possible outcome.”
Despite such setbacks, Next remains positive that it is well-placed to enjoy growth despite uncertainty in the sector.
Chairman of Next John Barton said: “The year to January 2013 was another good year for Next.
“We anticipate another challenging year ahead, with little if any growth in the UK retail economy.
“In these circumstances we again aim to achieve growth by investing in the Brand, improving our products, controlling costs and returning cash to our shareholders.”