Next group profits were up by 5% to a slightly better than expected £918m ($1.17m) as sales rose almost 6% to £5.8bn in the year to January.

Retail profit was reported to be £210m, up 3% year on year. Next said selling prices on like-for-like goods for customers are currently down 2%, thanks to decreasing factory gate prices, with price tags set to fall by another 0.5% in the six months to next January.

Lead retail analyst at GlobalData Emily Slater explained: “Next expects deflation on its products throughout the year, as although the Red Sea crisis has led to delays of shipments of seven to 10 days, prices will not go up.” 

The retailer’s chief executive Simon Wolfson said that after a positive year of sales and profit growth in the year to January, it was “a long time since we started a year in a more positive frame of mind.”

“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. In many ways, it feels like we are now entering a new era,” said Wolfson.

During FY23, Next saw an uptick in full-price sales, marking a 4% increase, while its total trading sales increased by 3% to reach £5,317m.

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Slater believes Next’s success has been down to the adept management of its multi-brand online platform, providing consumers with convenience and flexibility in their shopping experience allowing customers to “both trade up and down, as its credit offer also appealed to cash-strapped shoppers,” she said.

She further explained that although the British retailer expects its FY24/25 full-price sales to increase by a relatively modest 2.5% due to a rise in consumer confidence Slater suspects that many consumers will direct their spending towards leisure and holidays.

Key results from Next FY23:

  • Group sales are 5.9% higher at £5.8m,
  • Operating profit saw a 5.2% increase to £996m,
  • Online channel sales rose by 5.0% to £3.1m, while total retail sales were flat.

Slater found that Next had identified three avenues of growth: the development of the Next brand overseas, new brands and licenses and the revenue from its Total Platform.

“Its Total Platform infrastructure creates greater acquisition opportunities, and with two key retailers currently up for grabs in the UK, namely The Body Shop and Ted Baker, Next will likely keep an eye out for any potential acquisitions that would complement its proposition well,” said Slater.

GlobalData apparel analyst Louise Deglise-Favre previously told Just Style Next would be “best placed to snap up” Ted Baker as “it can build on its existing licensing partnership”.

Slater said: “As part of developing the Next brand, the retailer will invest in its ‘better’ and ‘best’ products at the top end of its price architecture, helping it capitalise on growing consumer demand for investment pieces, and this will likely grow as consumers start to see a rise in their discretionary incomes throughout the year.”

Next’s chairman Michael Roney said that the retailer had been focused on improving its product range, inline service levels, managing costs and profitability, whilst “laying the foundations for future growth businesses.”

Next, which acquired majority stakes in brands such as FatFace, Cath Kidston, and Reiss last year, intends to continue seeking investment opportunities in brands this year.

The retailer shared plans to expand in Europe, the US, the Middle East, and Asia via new partnerships including with US department store Nordstrom and new franchise and licensing deals in India.

Next expects full-price sales for the full year to be up by 2.5% and anticipates the quarter will “performance very differently” with sales in the first quarter up 5% and flat in the second.