Following today’s release of Next’s figures for the year ending 31st January 2023; Emily Salter, senior retail analyst at GlobalData, a leading data and analytics company, offers her view: “Next has had another strong year, as its total trading sales rose by £399.6m to £5,146.1m with full-price sales growing by 6.9%, in line with the more positive revised guidance it gave in January after the retailer benefitted from a good Christmas. Retail spend in the UK has remained surprisingly resilient so far despite indicators of consumer confidence remaining highly negative and as inflation unexpectedly rose again in February, boosted by higher food prices. Next has benefitted from this continued propensity to spend, with its broad offer catering to a wide range of consumers, including those trading down to more value-focused brands or focusing on more essential purchases, and to shoppers who can afford to trade up to more premium and aspirational brands.
“Next’s retail sales drove growth rising by 30.2% as shoppers returned to stores, especially to city centres as their shopping habits normalised after the pandemic, with city centre like-for-like sales increasing by 23% versus retail parks which fell by 3% after previously outperforming. Although the retailer’s online sales fell by 1.9%, they remained 40.1% higher than pre-pandemic levels, while retail sales are only 0.7% above, illustrating the lasting shift to online and the strength of Next’s online proposition, especially in its branded offer. To lure shoppers to its stores, Next should launch branded areas in its stores of those it has acquired, as it has done in its joint venture with Gap.
“The retailer has held the guidance it gave in January for its FY2023/24, anticipating that full-price sales will fall by 1.5%. Within this, it expects the first half of the year to be weaker, as sales in H1 FY2022/23 were boosted by warm weather and high demand for clothing for occasions and holidays. Next’s full-price sales in the last eight weeks fell by 2.0%, in line with its guidance for the first quarter, as the unseasonably cold weather in March will likely have dampened sales. On a positive note, selling price inflation for FY2023/24 is expected to be slightly lower than previously thought, 1ppt lower in spring/ summer at 7% and 3ppts lower in autumn/ winter at 3%.
“As Next’s operating profit has continued to climb, it has snapped up a number of struggling retailers in the past few months, such as Made.com and Joules, and it purchased Cath Kidston yesterday. Cath Kidston will be a good fit for the retailer, and the fact that the brands it has acquired are all upper-mass market or premium is not by chance but proves that this is an area of retail that is struggling in the cost-of-living crisis. Brands it acquires can be launched on Next’s Total Platform, although its ability to take on more clients is currently constrained by warehousing capacity, systems timescales, and the expertise required to take on new clients, although it aims to eliminate these barriers this year.”
