Retailer Results / Next



Trading Update
Covering 26 weeks to 30 July 2016

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Trading Update
Covering 26 weeks to 30 July 2016


• NEXT Retail -3.3 per cent
• NEXT Directory +5.7 per cent
• NEXT BRAND +1.5 per cent


Overall sales performance improved on the previous quarter but remained weak. Full price sales in the second quarter were +0.3 per cent on last year. The table below sets out the sales performance by quarter for Retail and Directory. NEXT Brand full price sales for the year to date are -0.3 per cent on last year.

New space added +1.5 per cent to Brand sales for the first half whilst NEXT Directory continued to benefit from growth in overseas sales and improved stock availability.

Next remarked that it was too early to draw any firm conclusions from the impact of the EU Referendum. So far they hadn’t seen any “clear evidence of any appreciable effect on consumer behaviour”. On the devaluation of sterling they commented that they were fully hedged until the start of 2017. However, based on current exchange rates, they expect costing rates (the average value of Sterling in the overseas currencies that we buy) to be around 9 per cent worse than 2016/17.

Further, tough trading conditions are expected for the remainder of the year, especially in the next quarter due to it being their best quarter in the previous year when sales rose by 6.0 per cent.



Trading Update
Covering 31 January to 2 May


• NEXT Retail -4.7 per cent
• NEXT Directory +4.2 per cent
• NEXT BRAND -0.9 per cent


Total Sales for the period from 31 January to Monday 2 May were down -0.2 per cent with full price sales down -0.9 per cent, which is at the lower end of NEXT’s sales guidance for the full year of -1.0 per cent to +4.0 per cent.

However, the bottom has dropped out of the clothing sector in recent months and NEXT appears to have outperformed a very challenging market. According to the ONS, during the same period, clothing sales fell by 3.9 per cent. We also note that NEXT Directory sales continue to slow with sales up by 4.2 per cent over the period, but again, outperforming the market for clothing and footwear online sales.

NEXT blamed a much colder March and April for reduced demand for clothing, particularly over the Easter period. However, they believe it unlikely that sales will deteriorate further. That said, the poor performance of the last six weeks may be indicative of weaker underlying demand for clothing and a potentially wider slow-down in consumer spending. Given this uncertainty, NEXT has widened full price sales guidance range to -3.5 per cent to +3.5 per cent.



Full Year Results
Full year results ending January 2016


• NEXT Retail £2,373.5m FY2016 (£2,348.2m FY2015) – up +1.1 per cent
• NEXT Directory £1,658.7m FY2016 (£1,540.6m FY2015) – up +7.7 per cent
• NEXT BRAND £4,032.2m FY2016 (£4,027.8m FY2015) – up +3.7 per cent
• Other £117.5m FY2016 (£139.0m FY2015)
• Total NEXT Group sales £4,149.7m FY2016 (£4,027.8m FY2015) - +3.0 per cent


After a challenging end to the year, overall results suggest a solid but unspectacular year for NEXT. NEXT Brand full price sales were up +3.9 per cent, underlying profit before tax was up +5.0 per cent and underlying Earnings per Share (EPS) were up +5.4 per cent. Full price sales were slightly ahead of the central guidance (of +3.5 per cent) issued in March last year. Profits advanced more than sales, mainly as a result of better bought-in gross margins in the first half.

Total Retail sales were up +1.1 per cent, with net new space contributing +2.4 per cent to growth. Full price sales were up +2.2 per cent. Improvements in margin was assisted by better currency rates. Net trading space increased by 275,000 square feet to 7.6m square feet. Store numbers remained broadly the same, with the increase from new stores being offset by the closure of smaller, less profitable stores. Looking ahead, NEXT estimate that they will add around 275,000 square feet of net trading space in 2016/17 and a further 350,000 square feet in 2017/18.

Total Directory sales grew by +7.7 per cent. Full price sales grew by +6.5 per cent. Full price sales in the UK grew by +4.6 per cent. Much of the UK growth was driven by LABEL, the core UK NEXT full price business grew by +2.3 per cent. The overseas business grew by +20.0 per cent. During the second half of the year, Directory suffered from poor stock availability. Active customers increased by 11 per cent to 4.6 million, driven by the acquisition of UK 'cash' customers and customers overseas. Directory overseas continues to trade well with full price sales up 20 per cent. Stripping out the effect of the pound's appreciation, sales in local currencies were up 41 per cent.

NEXT are proposing a final ordinary dividend of 105p, making 158p in total for the year, up +5.3 per cent. During the year NEXT also paid a further 230p of special dividends.

NEXT CEO, Lord Wolfson said: “It looks as though we may be set for a challenging year, with economic and cyclical factors potentially working against us. We are very clear about where we need to focus our energies in the year ahead.

• Continue our efforts to improve our buying processes, pushing the boundaries of what we can achieve in terms of design and quality.
• Upgrade the UK Directory business, developing new ways of recruiting customers, stimulating sales from existing customers, presenting our website, personalising our offer and improving our delivery service.
• Continue to develop Directory’s two growth businesses – LABEL and Overseas.
• Develop and profitably expand our UK retail store network.
• Control costs through innovation.

“In many ways we have more to do than ever before with complex challenges to our working practices across product, marketing and systems. It may well feel like walking up the down escalator, with a great deal of effort required to stand still. It will not be the first time we have felt this way, and our experience is that the effort put into improving the business in tough times can pay handsome rewards when conditions improve.”



Trading Update
60 days to 24 December 2015


• Full price total sales up 0.4 per cent in 60 days to 24 December 2015
• NEXT Retail -0.5 per cent (60 days to 24 December 2015)
• NEXT Directory +2.0 per cent (60 days to 24 December 2015)
• NEXT did not discount stock before the end of sale season
• Stock for the End of Season Sale was -7 per cent

• Year to 2 January 2015
· NEXT Retail +2.1 per cent
· NEXT Directory +6.1 per cent


Overall, these figures are very disappointing for NEXT, a business accustom to stronger growth and a weaker competitive environment - particularly for their online proposition. Admittedly, weaker sales performance in the fourth quarter was down to unseasonably warm weather in November and December. Nevertheless, difficulty faced by Directory sales was compounded by poor stock availability from October onwards. In addition, NEXT highlighted that the online competitive environment is getting tougher as industry-wide service propositions catch up with the Directory business.

Full price sales for the year to date are currently +3.7 per cent ahead of last year, just below the bottom end of previous guidance of +4.0 per cent to +6.0 per cent. However, control over margin, costs and stock, along with healthy clearance rates means that full year profits are expected to remain within profit guidance of £810m to £845m, issued in October.

Interestingly, sales fell in six of the seven weeks to the week-commencing 13 December. Even then, sales in the week commencing 13 December were up by just c 0.4 per cent, year-on-year. Unfortunately, NEXT did not reveal weekly sales in the week prior to Christmas.

These results are likely to set the tone for a number of clothing retailers.

In terms of outlook, NEXT is currently budgeting for Brand full price sales growth in the year to January 2017 to be between +1.0 per cent and +6.0 per cent. Profits are expected to grow in line with sales.

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