U.K. Retailer Next Sees Brighter Days Ahead Despite Macro Challenges
LONDON — British shoppers spent heartily in the run-up to Christmas, according to Next plc, which beat its own full-price sales expectations for the months of November and December, and is expecting brighter months ahead.
Next, which has its own stores and a large online platform selling third-party brands, said full-price sales were up 5.7 percent in the two-month period.
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That compares with the company’s own projection of a 2 percent uptick, with online performing particularly well in the two months.
The figures refer to Next full-price sales, and not those of its third-party platform or subsidiaries. Next has investments and partnerships with companies including Gap, Reiss and Victoria’s Secret.
As a result, Next has increased its full-year profit before tax guidance by 20 million pounds to 905 million pounds, up 4 percent versus last year. The company’s 2023-24 fiscal year ends on Jan. 27.
In the upcoming 2024-25 fiscal year, full-price sales on continuous business are set to rise by 2.5 percent while Next group sales, including subsidiary companies, will rise by 6 percent. Group profit before tax for the year ahead is set to be up 5 percent.
The company is cautiously optimistic about the 2024 calendar year.
“On the face of it, the consumer environment looks more benign than it has for a number of years, albeit there are some significant uncertainties,” Next said in a trading update on Thursday.
It said that wages will likely rise in line with, or may even exceed, consumer price inflation. “For many consumers, this will ease the pressure they have felt on their cost of living for the past 18 months,” the company said.
Next added that cost price inflation for its own products is “diminishing, mainly as a result of decreasing factory gate prices. We believe that this will allow us to maintain zero inflation in selling prices.”
The company added that 2024 will be the first time in three years that input prices have been stable.
On the downside, Next said higher wages will likely result in “reduced employment opportunities in the wider economy,” and increased unemployment.
Higher mortgage rates could also dampen consumers’ appetite to spend. Next added that “difficulties with access to the Suez Canal, if they continue, are likely to cause some delays to stock deliveries in the early part of the year.”
Next has remained one of Britain’s most robust retailers on the high street and online through the ups and downs of physical and online retail, and post-pandemic.
Its third-party platform sells brands including Barbour, Tommy Hilfiger, Levi’s and Ralph Lauren, while the company also provides tech, warehousing and logistics to other brands.
Amid the maelstrom of high-street shop closures, retail failures and shrinking fashion ecommerce valuations over the past five years, Next has been growing steadily under its longtime chief executive officer Simon Wolfson.
Next plc, which reported sales of 5.2 billion pounds in fiscal 2022-23, has around 700 stores in the U.K., Asia and Continental Europe.
The Next.co.uk marketplace carries more than 700 fashion, home and beauty brands. The Leicester, England-based company is also part-owner of high street clothing brand Reiss, and is the U.K. partner for brands including Laura Ashley home and Victoria’s Secret.
In 2022, it formed a joint venture with Gap Inc. and brought that brand, as well as Banana Republic and Athleta, back to the U.K. market after the retailer closed its standalone stores amid falling sales.
Shares were up 5 percent at 84.44 pounds on the London Stock Exchange in late afternoon trading.
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