Where on one hand bad weather and weakening economy has affected the footfall of many brick-n-mortar stores in the UK, weeks of rain has actually boosted Next’s online business. With the shoppers turning away from the high street to their computers for their latest purchases, Next’s total garments sales online for the first half were up 4.5 per cent against last year, while the retail sales for the same were up only 0.2 per cent that too because of their new stores, compensating the lower sales from the high street, thus presenting a very decent all-round performance.
Next Plc, UK’s second-largest clothing retailer, was successful in increasing its annual profit forecast after reporting first half sales that rose above the analysts estimations. Driven by a surge in online and catalog sales, Next posted a 6.6 per cent rise in its pre-tax profits and the retailer raised its profit estimation to $ 976 million dollars for the current financial year.
Next Directory, the company’s online and catalogue business, was the biggest contributor to Next’s better-than-expected results, accounting for a third of the company’s sales and 44 per cent of its operating profits. Overall sales of Next Directory including both apparel and non-apparel products were up by 13.3 per cent on last year.
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Next’s business model
Next Retail: A chain of 500+ retail branches and counting.
Next Directory: A home shopping catalogue and Website with more than 2 million active customers.
Next International: With 180+ international stores.
Next Sourcing: For own brand products; Lipsy, which designs and sells its own fashion products through wholesale, retail and Website channels. [/bleft]
The UK retail sector has been hit hard by a stream of negative retail figures in recent weeks as per the reports of the British Retail Consortium, showing a decline in the number of outlets for the first time in four years. M&S, UK’s biggest clothing retailer by sales’ reported a slump in first-quarter sales this year and Tesco, world’s No. 3 retailer, issued its first profit warning in 20 years. Despite the prevalent market circumstances, Next was amongst the few retailers that were able to register better-than-expected sales, and a lot of credit for the same goes to the brand’s business model. In the vein of its larger European peers Zara and H&M, Next’s business model proves to be complementary to profits during times of economic crunch, as shoppers struggling to meet the ends turn to cheaper options, cutting down on expensive products.
Though, Next’s fashion credentials are not as strong as Zara or H&M, its tight control of costs, particularly sourcing cheap raw materials has led to consistently strong earnings by the brand. In addition to that, the company’s ability to find profitable new markets also proves to be a help in recessionary times.
Even with the strong online sales, the brand had been actively working towards its retail channel to sustain and perform better, Next outfitted the British athletes of Team GB (Great Britain) and Paralympics GB in the ceremonies. Improving and developing Next product ranges has always proved beneficial for the brand’s sales performance. Moving on with the same thrust, the new range of lines by Next in 2012 included maternity wear, work wear, a sleepwear range and kids wear collection. Though still criticized by some for its pricing, the brand is working hard to offset the increasing manufacturing costs by sourcing its products from new, cheaper suppliers and putting pressure on the existing ones to control costs.
According to observers, the key strength of the brand lies in the company’s adaptability, which is crucial in the ever evolving retail market. In addition to sustained sales growth, Next has been very strong, not bowing to competitive pressure to cut prices early and erode margins. Despite the success chart, Next is being very cautious for the remaining year to maintain their sales, as predictions indicate that the economy and sales will be anaemic in the second half of the year.
