Next to cut prices as profits pass £900m
NEXT has said it will be reducing prices for shoppers as it brushed off Red Sea shipping disruption and notched up better-than-expected annual profits.
The Enderby retail giant reported a 5 per cent rise in underlying pretax profits to £918 million for the year to January, helping shares lift 5 per cent after the announcement was made.
This was better than the £905 million it had recently guided for, thanks to better-than-forecast stock clearance in the January sales, and comes after it had already upgraded its earnings guidance five times over the past year.
It said it was cutting prices for customers by 2 per cent thanks to lower buying costs for clothing and goods, with price tags set to fall by another 0.5 per cent in the six months to next January.
This comes despite the group taking a hit of just under £20 million from the Red Sea disruption, with ships having to take a lengthy detour to avoid the vital Suez Canal trade route because of attacks by Houthi rebels on cargo containers.
It revealed the shipping woes are leading to delays of between seven and 10 days on some goods from the Far East, but said it is not seeing “any material adverse impact” on its spring/summer ranges.
The group said: “Our product teams have adjusted the timing of their contract bookings to account for this delay.
“In addition, higher freight costs have been factored into our prices going forward, but we still anticipate that our prices will fall.”
Next kept its forecast for sales and profit in the current year, with the group expecting a 4.6 per cent rise in underlying pre-tax profits to £960 million and full price sales up 2.5 per cent.
The sales growth will mark a pullback on the 4 per cent increase seen in the financial year just gone, with the group noting concerns about the jobs market in the year ahead as higher wages put businesses under pressure. Outgoing finance director Amanda James, who is retiring from the group in July after 28 years with the business, told PA news agency: “We are mindful that there could be a weakening in the employment market, while mortgages are also coming to the end and need refinancing. “With that in mind, it makes sense
Higher freight costs have been factored into our prices but we still anticipate our prices will fall Next
to plan for a budget that we can achieve.”
But higher wages – in particular the near-10 per cent rise in the National Living Wage due on April 1 – are also set to boost consumer spending.
“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.
Ms James declined to comment on recent reports that Next is considering a deal to rescue parts of The Body Shop after the cosmetic and skincare chain’s UK operation was placed into administration last month.
Ms James said Next will consider further deals to boost its burgeoning stable of brands following an acquisition spree in recent years that has seen it snap up the likes of Reiss, FatFace and Joules.
“For the right business, we would absolutely take a look at it, but we have a strict criteria,” she said.