Next faces a downturn

Next profits have fallen for the first time in nearly a decade.

The UK high street fashion retailer said pre-tax profits fell 3.8 per cent to  £790.2 million last fiscal year.

Emily Stella, a senior retail analyst with GlobalData, says the company has faced numerous challenges over the last year: erratic weather, rising import costs as the pound depreciated, and Next Directory being hit by increased competition from online pure-plays Asos and Boohoo.

“Not to mention a more general shift away from clothes buying in favour of spending on leisure,” she commented.

“Next’s stance on discounting – only marking down items during sale periods – has been a good thing for the retailer, sustaining consumer perceptions of product value and allowing Next to retain high margins. However, full-price retail sales were down 4.6 per cent, indicating that shoppers are not buying into its current proposition – and Next admits it has not been fast enough at responding to new trends.”

But she says the retailer remains one of the best-run brands on high street – the issue is that the clothing market is “far tougher than before”.

Next says it anticipates a difficult first half of the new trading year with improved performance in the latter half.

“But the retailer could find the next few years a challenge as competition intensifies and Next struggles to keep up,” concludes Stella.