U.K. retailer Next, owner of Reiss and Fat Face beats expectations as it posts record profits
Next Plc expects profit to expand to nearly £1 billion ($1.3 billion) this year as rising wages free up British shoppers to spend more on fashion.
The British fashion and homewares retailer, whose performance is a closely watched indicator of consumer demand, stuck with guidance it gave in January that it will generate £960 million of profit in 2024/25.
“It has been a long time since we started a year in a more positive frame of mind,” Chief Executive Officer Simon Wolfson said in a statement Thursday, adding that the consumer environment is more benign.
Shares of Next rose more than 4% to a record high in early trading in London. The stock is up 29% in the past year.
Wolfson is known to be conservative in his outlook and typically beats expectations. Last year, the company made £918 million of pretax profit after raising its outlook five times as demand surged.
Next is considered one of the best retailers in the UK, with well-run stores and online operations. Its e-commerce hub — Total Platform — provides services that help other third-party retailers sell goods online.
The retailer has been on an acquisitive streak in recent years, buying brands including FatFace, Joules, Cath Kidston, and Made.com. The company also has control over UK fashion house Reiss.
Easing Inflation
“It’s not that we’re wildly optimistic,” said Wolfson in an interview. “It’s that we’re more positive than we have been for the last 10 years.”
Wolfson, who has run the retailer since 2001, said the company’s cost base is under control following an historic inflationary period and it has new avenues of growth.
“In many ways, it feels like we are now entering a new era,” he said.
What Bloomberg Intelligence says:
Next instills confidence in its reiterated guidance for £960 million in pretax profit in fiscal 2025, which is 4.6% ahead year over year, by reporting £918 million for fiscal 2024, just ahead of its target range. A stronger and broader fashion position, increased Total Platform participation and a small increase in gross margin are seen offsetting higher wage costs that — more broadly reflected in UK real incomes — support spending at the retailer.
— Charles Allen, BI retail-industry analyst
Next Sees Wage Jump Driving Sales to Confirm Profit View: React
Future growth will come from expanding the Next brand overseas, developing new brands and continuing to push its Total Platform division.
Next said it expects no inflation in selling prices this year as its own cost pressures recede, which is good news for consumers who’ve had to absorb higher costs in the past year.
“Most consumer trends have gone back to where they were pretty much pre-pandemic,” said Wolfson.
