Next mixing old with new to keep its bite
WEDNESDAY saw Next release its third quarter results. While the update was brief, the message was clear – as the high street becomes more and more gaptoothed, Next is keeping its bite.
Overall full price sales ticked up 1.3 per cent for the quarter, despite like-for-like sales falling 8 per cent. That’s because Next has been stemming the impact of that decline by opening new stores. The group plans to add some 100,000 sq ft of extra space by January 2019.
Online business has been flying, too, since the group splashed out on a revamp of the website and app. Online now accounts for almost 50 per cent of all sales, with click-and-collect responsible for almost half of all web-based orders. That’s interesting in itself because we’re seeing a meeting of old and new at Next. Physical space and the internet aren’t always at loggerheads – good oldfashioned shops are actually an integral part of its online performance.
And Next has another string to its bow. It has its own finance business, where it offers credit to customers. That’s an added revenue stream compared to other retailers, and the group expects a £123million profit from this in the full year.
Overall, profits are set to come in just ahead of last year at around £727million. Now that’s all good news, but Next isn’t without its risks. Sales this quarter, although positive, moved slower than earlier in the year. A lot of that’s because the bumper summer boosted previous performance. But weird weather can’t be relied on forever, so investors will want to see progress without a helping hand from the elements.
There are also valid concerns around that store expansion plan. Given the host of high street names struggling lately, that’s not a surprise.
Next’s new shops are pulling their weight for now, but in this climate that could easily run out of legs.
But all in all, Next’s vitals are telling a healthy story. It’s in a much sturdier place than a lot of high street neighbours, and slightly slower progress is still progress. If it can keep growing online sales, and those new stores perform as expected, Next should have a smooth road ahead.
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