Next faces a downturn
In this article (5)
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.
Questions & Answers
Q.What is the primary reason for Next's profit decline, according to the article?
What is the primary reason for Next's profit decline, according to the article?
Next's profits fell due to several challenges, including erratic weather, rising import costs, and increased competition for its Directory from online retailers. There was also a general shift in consumer spending away from clothes towards leisure activities.
Q.How has Next's discounting strategy impacted its sales performance?
How has Next's discounting strategy impacted its sales performance?
Next's strategy of only discounting during sale periods has maintained perceptions of product value and high margins. However, full-price retail sales dropped 4.6 per cent, suggesting consumers are not buying its current full-price offerings.
Q.What does Next expect for its financial performance in the coming year?
What does Next expect for its financial performance in the coming year?
Next anticipates a challenging first half of the new trading year. They expect an improved performance during the latter half, but the overall market remains much tougher than before.
Q.What challenges does an analyst predict for Next in the medium term?
What challenges does an analyst predict for Next in the medium term?
A senior retail analyst predicts Next could face a challenging few years as competition intensifies. She believes Next may struggle to keep up with the fast-evolving clothing market.
Reader pulse
Is Next's sales decline a sign of wider retail struggles?
22,216 votes so far