Britain’s second biggest clothing retailer Next reported its strongest growth in terms of sales for many years. The company have overtaken rival M&S in annual profits and also reported a 19.3 per cent rise in profits before tax to £324.2 million. Next also reported a 10.3 per cent increase in revenues to £1.85 billion for the first half of the year.
CEO Lord Wolfson said: “We believe an improving economy, low interest rates, increasing availability of credit, less general discounting on the high street and much better weather this summer weather, have all contributed to an improvement in our sales performance. In addition, an improved housing market has helped our Home business”.
Nevertheless, the retailer retained its cautious outlook, and was keen to stress that certain underlying factors contributed to the impressive figures, which might not be so big next year. Although Next’s growth is unlikely to continue indefinitely at such a lightning pace, its progress is more than just the result of riding the tide of favourable currency conditions, fine summer weather, less general discounting in the high street and an improving economy and housing market.
Retail consultant David Alexander commented on next, “The retailer’s strategy of aggressively acquiring space for its Home business since the onset of the credit crunch, while other home and furniture retailers were dying like flies, looks a particularly shrewd move. Not only has Next been able to capitalise on the favourable rental conditions from landlords desperate to fill space in struggling retail parks during the recession, but now they have they operations in place to be a strong competitor as consumer appetite for big ticket furniture purchases and homewares returns”.
Next’s stores contributed more to growth than domestic Next Directory sales for the first time in several years,and it has reiterated its guidance to shareholders for the rest of the year, which forecasts full-year revenue growth between 7 per cent and 10 per cent.
A case in point is its switch from a two season to a four season buying cycle, which has ensured that its stock is more weather appropriate and allowed it to capitalise fully on the favourable summer weather. Last year stock management was an issue that drew criticism; not so this time around.
With recent BRC figures suggesting footfall at revitalised out of town retail parks is growing at a much faster rate than the highstreet, Next’s 1.7million sq ft of space in its Home division (a quarter of the retailer’s total space) looks set to be one of its most promising avenues for growth in the medium term.
Next is nothing if not bold and its success if anything goes to prove Del boy’s mantra that “he who dares wins”. It may come to pass that the prospect of interest rate rises and less favourable weather conditions will put a curb on consumer spending in the months to come, but if any retailer looks well-positioned to carve out a share of that spend, it is Next.