Next is consistently one of the top performers in UK (and increasingly global) retail and Thursday saw it delivering more evidence of that as the firm reported its results for the year to January.
Next full-price sales rose 5.8% with total group sales including its subsidies rising 8.2% to £6.321 billion. Group profit before tax was up 10.1% to £1.011 billion and profit after tax rose 8.5% to £761 million.
And more good news was that full-price sales in the first eight weeks of its new financial year have been ahead of its expectations. As a result it’s upgrading it’s full-price sales guidance for the first half to an increase of 6.5% compared to the 3.5% previously expected. Sales for the full year should also be up 5% rather than 3.5% as previously guided. And group pre-tax profit should be £1.066 billion. That’s £20 million higher than it had expected and would represent a rise of 5.4%.
In the latest year, not all of the figures were positive but the overall result was a strong one for the company. For instance, within ‘UK Retail’ (that is, UK retail stores), full-price sales for the Next brand were down 2% but wholly-owned brands and licenses (WOBL) were up 2%, with third-party brands up 31%. The overall UK Retail total was down 1% at £1.849 billion.
Looking at e-commerce, UK Online was up 3% and WOBL online up 4%, with third-party brands up 10% for a total of a 5% increase to £2.54 billion.
Combined, UK Retail and UK Online was flat for the Next brand, while for WOBL it rose 4%, third-party brands rose 11% and the total rose 3%.
Sales via international Next websites rose 14% for the signature brand and 28% for WOBL, while third-party brands rose 50% for a total of 20%.
Via international third-party aggregators the Next brand rose 19% while WOBL surged over 200% and third-party brands more than doubled for a total sales rise of 25%.
And when taking the international Next websites and international third-party aggregators figures together, total Next brand sales internationally jumped 19%, while WOBL rose 61%, third-party brands rose 51% and international sales as a whole rose 25%.
Reaching out to the world
The company said the Next brand is “growing beyond the constraints of its own infrastructure”. It’s no longer limited by the reach of its UK infrastructure and customer base with the ability to tap into overseas third-party distribution networks having allowed its international websites to grow their sales by 350% in the last 10 years.
The Next brand has also gained traction through international platforms such as Zalando in Europe and Nordstrom in the US. In fact sales through third-party platforms grew 36% last year and now account for 30% of the company’s international business.
The firm is clearly growing fast beyond its UK base and said that while it’s wary of “grand visions”, if global fashion tastes continue to converge then it’s likely that, online at least, “a small number of increasingly global brands will serve more and more of the worlds fashion needs”. It’s aiming to create ranges that are strong enough for it to earn its place as one of those brands.
But the group also cautioned that this isn’t just about having a grand ambition, it’s about building a business that can be hugely profitable and it knows that it’s success isn’t predestined.
Tariffs not a problem
Given its international plans, Next also addressed the current situation with tariffs and planned changes to the de-minimus rule in multiple countries that aim to close import duty-free loopholes exploited by global fast-fashion firms.
It said the introduction of new tariffs in the USA, along with the removal of de-minimis customs thresholds in the US and EU (the latter planned for 2028), are “currently anticipated to have relatively little impact on the overall group’s sales or profits”.
In the EU, 71% of its business is currently sold by an EU domiciled subsidiary and won’t be affected by the removal of the de-minimis rule. The balance is sold from a UK company and imported by the consumer, which will attract additional duties in 2028. But the estimated net cost of these additional EU duty liabilities is estimated to be less than £1m.
And it added: “As a group, Next has very little business in the USA. However, we and our subsidiaries are making arrangements to trade through a US entity, which we believe will eliminate the net cost of the removal of de-minimis thresholds. The volume of goods the group imports to the US from China is negligible.”
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