UK: Tough year ahead for Next despite FY profit rise
The consumer slowdown is set to hit sales at UK-based clothing retailer Next over the next six months, despite the chain recording a 4.1% profit increase in the year to the end of January.
Although he expressed confidence in the company's underlying business, Next chief executive Simon Wolfson predicted that like-for-like retail sales would fall by 4-7% in the first half of the fiscal year, while direct sales through its Directory arm would increase by 0-2%.
Full-year pre-tax profit was up 4.1% to GBP498.1m (US$995.2m), while total revenues edged up 1.4% to GBP3.33bn.
Retail sales were flat at GBP2.26bn, while Directory revenues were up 3.3% to GBP799.8m.
"We can see no reason why there should be any recovery in consumer spending during the year ahead," said Wolfson.
"Recent base rate cuts will do little to reduce the overall burden of mortgage repayments… This combined with increases in fuel, tax and other essential household costs mean that it will be at least 12 months before the consumer has a stable year-on-year cost base."
Next chairman John Barton agreed that trading conditions would continue to be difficult.
"In these circumstances, we believe that our main strategy of investing in the Next brand whilst improving and expanding our product ranges will offer us the best protection against any downturn in the UK economy," he said.
Full-year gross margins improved by 1.8%, largely because of more efficient sourcing, rather than increasing selling prices, Next said.
The company plans to improve its website functionality over the next year, following its development of a Euro site for Spain and Eire.
The internet is new responsible for nearly 60% of Next Directory orders.
Next is also planning to develop wholly-owned businesses in Central Europe and Scandinavia, operating the stores in much the same way as those in Eire.
The company is also set to open up ten stores in China over the next two years.
Help test our new apparel sourcing tool.
- What TTIP might mean for US, EU textiles & apparel
- Unlocks for the future fashion sourcing landscape
- EU eyes mandatory due diligence for apparel supply
- Geo-political uncertainty and how to survive it
- Where next for Corporate Human Rights Benchmark?
- US Q4 in brief – Finish Line, Oxford Industries
- Li & Fung forms supply chain partnership with PVH
- Sears has "substantial doubt" of future
- Vietnam limits hazardous chemicals in apparel
- World Bank commits $57bn to sub-Saharan Africa
- Central and East Europe Report Package
- Central America strategic sourcing review - a focus on Guatemala, El Salvador and Honduras
- Southeast Asia strategic sourcing review – a focus on Cambodia, Vietnam and Myanmar
- When Things Go Wrong - A Practical Guide to Managing Common Problems in Apparel Sourcing
- Outdoor performance apparel 2016: A broader perspective