Uncertainty at Next despite rising profits


Next‘s Boss has predicted the “toughest year since 2008” and the financial crisis as the company slashed its profit estimates.

The high street department store chain saw a 5% increase in full year profits for the 12 months to January 2016. Pre-tax profits rose to £821.3: a 4.8% increase from the same period last year. Total sales rose 3.7% to £4.03bn across the chain‘s brick and mortar estate and directory business, while in the retail division sales rose 1.1% to £2.37bn and profits reached £402.1m.

However, Chief executive Lord Wolfson warned that “economic and cyclical factors” would work against Next in the coming months.

“The outlook for consumer spending does not look as benign as it was at this time last year,” Lord Wolfson said, warning that “…although employment rates are at record highs, growth in real earnings slowed markedly from September.”  

Wolfson credited the company‘s successes to the “over achieving” targets set by buying teams in spring and summer, as well as “better” currency rates.

“We also believe that there may be a cyclical move away from spending on clothing back into areas that suffered the most during the credit crunch.”

In suggesting this “cyclical” movement Wolfson referred to Next‘s third quarter figures, which showed that clothing sales growth were marginal compared to the rises in restaurants, travel and recreation. Next was not the only retailer to suffer clothing sales as a result of the unseasonably warm weather in the latter part of last year, and should the pattern indeed repeat it is something the chain and its rivals would do well to prepare for.

“2016 will be a challenging year with much uncertainty in the global economy,” said Next Chairman Jon Barton.

“For Next it makes it particularly important that we remain focused on our core strategy… investing in the business, improving the design and quality of our products and returning surplus cash to shareholders.”

Next predicts that profits this year will range from £784m to £858m, respectively a 5% decrease and increase on last year.