Online remains Next’s saviour, says GlobalData

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Following today’s release of Next FY figures for 2018/19, Kate Ormrod, lead retail analyst at GlobalData, a leading data and analytics company, comments: “Despite a dismal November and a minor profit warning in early January, Next has managed to get through FY2018/19 fairly unscathed, certainly in comparison to the likes of Debenhams and Arcadia, with total brand sales rising £105.6m to £4,124.2m. The pressure on the high street continues to mount, and while the Next business is being propped up by its impressive online division, which accounts for 46.5% of brand revenue, its retail operations continue to struggle. While the weakness of its bricks-and-mortar proposition would leave many thinking its private label offer was uncompelling, full price online sales of Next’s own brand range rose 8.3% in the UK, demonstrating that there is clearly still appetite. There is significant opportunity to mop up sales from the likes of M&S and Debenhams, but there remains room for improvement in terms of design and fashionability in order to drive appeal among the under 40s, ensuring these customers are buying for themselves, not just their kids.

“Next has no plans to do away with its physical store network, reassuring shoppers that it will retain its presence on the high street. Rent reductions do however play a crucial role in maintaining its portfolio, with the retailer securing a reduction of 29% on leases renewed last year. Strategically the focus remains very much online, with Next revamping its website to enhance the shopping experience, with mobile enhancements and greater personalisation set for FY2019/20. The retailer’s push on credit has been notable, particularly emphasised in the new website design, with UK active credit customers rising by 30,000 on the year to reach 2.52 million and now accounting for 60% of its UK active customer base. Continued range expansion via new brands such as River Island and All Saints enhances Next’s destination appeal online, while the inclusion of Tesco’s F&F brand in womenswear presents the opportunity for Next to steal value shoppers from the likes of H&M, given its comparatively better fulfilment offer.

“Unlike many, Next feels more confident about the year ahead despite the ongoing Brexit saga – no doubt owing to the fact that the retailer is well-primed for the challenges ahead. However, while it notes that shoppers are fatigued by Brexit indecision, Next states it has seen ‘no evidence that the uncertainty is affecting consumer behaviour’ in its sector, and believes that other economic indicators such as employment and wages ‘look less worrying’ compared to last year. In fact, Next has announced that tariffs enforced under a No Deal outcome would reduce its costs by £12-£15m, which it plans to pass on to shoppers via lower prices – a positive message among all the retail doom and gloom, and once again sets the bar for others in the sector.”