Next shines yet another light on the underlying shape of things to come in retail. The issue is the revenue line, not the cost line. And revenues are down, meaning lower profits for the second year running. Store sales are down yet again (-7.9%) and while online is up (+9.2%) the latter is not enough to compensate for the former. Pre-tax profit is down 8.1%.
The company says this is the worst trading year it has seen, that next year will be better, and that it has reviewed every aspect of its business. The first is certainly true, the last point must be, but I am deeply skeptical about the middle one. Next’s body language tells me that it is travelling in the wrong direction, as indeed it has been for some years.
So many retailers mistakenly think lowering their prices will make their offer more attractive. This demonstrably is not true, and their trading performance reflects this. The symbolically worrying decisions around Black Friday, Tesco and car showrooms are distractions that betray an uncertainty about who and what Next stands for these days.
In spite of all the above, Next remains one of the very best run of all UK retailers. It’s control over its costs stands out. And on that count, this sends a warning signal to the rest of the market. Nevertheless, in this market it will take much more than just effective cost management to defend a business. Next looks quite average when it comes to driving sales or even simply maintaining them.
In a week when George Davies is back with yet another launch, I can’t help thinking back to the early days of Next. It was very new, very different, and put its retail money where its retail mouth was. In other words, it was entrepreneurial, totally in tune with its core customer and had the courage to be different. Today’s Next remains stronger than most mid-market players but looks tired and boring.
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