Next’s strong Directory growth offsets decline in store-based sales

Next: decline in store-based sales off-set by Directory business

Next: decline in store-based sales off-set by Directory business

Next’s sales rose 3.1% between 1 August and 24 December 2011 with strong growth in its Directory business offsetting a decline in store-based sales.

The retailer’s Directory business grew by 16.9% in the period and by 16% in the year-to-date. Retail sales, in contrast, fell by 2.7% in the 21 weeks to Christmas Eve and by 2.2% in the year-to-date. 

Despite a good final week before Christmas, Next said November and December sales were disappointing, given snow adversely impacted sales in 2010. 

“A number of factors have subdued sales in the final quarter and it is hard to judge to what extent warm winter weather and higher levels of competitor discounting masked the deeper, longer lasting, economic effects,” it said.

Looking ahead, Next highlighted positive and negative influences on shoppers. It anticipates the impact of inflation will ease in Q2 but there will be a continuing credit squeeze on businesses and consumers.

Commenting on the figures, James McGregor, a director of retail analysts, Retail Remedy, said: “There was little Christmas sparkle for many retailers within the golden quarter but Next can at least supply a small degree of cheer.

“The Next numbers came in as expected, with depressed retail store sales being counterbalanced by its Directory and online channel.

“Looking forward, the 2012 ‘negatives’ Next highlights are far more negative than the ‘positives’ are positive.

“Nobody doubts the retail sector is set for an extremely challenging 2012. As we are seeing every other day, there will be far fewer retailers standing come the end of this year.

“The bigger players will be closing their secondary and tertiary sites, as the looming renewal of tenancy agreements triggers retrenchment. This will especially be the case with the larger brands such as Next and Arcadia Group.

“Contrary to what Mary Portas would have liked, 2012 will see an increase in out-of-town and large format retail sites.

“Like many retailers, Next has been held to ransom by the topsy turvy weather. With its spring lines coming in at the end of the month, and winter stock close to gone, a sudden return to cold weather would be a set-back.

“For the majority of retailers, sale mode has been the default mode for many months — and it may stay that way for some time yet.

“The Next group has remained a strong player within a depressed market because it continues to listen to its customers and reacts well to a dramatically changing retail landscape.

“Next was one of a handful of high street retailers that saw the potential of multiple channels, such as online and its Directory, and loyalty in those areas continues to grow.

“The introduction of branded fashions into its directory has driven improvements in fashion perception, average selling price and has resulted in a wider target audience.

“Next has also benefited from the continued development and growth of the Lipsy brand.

“The business continues to grow sales through new space and new categories, such as its large format Home & Garden extensions.

“Its ability to grow sales outside the UK through its online channels means it can reach a much wider national and international market at a relatively low cost.

“Next has also been successful at delivering margin improvements through improved sourcing.”