Next warns year ahead will be worst since 2008 despite posting rise in full-year revenues and profits
Next has warned the year ahead could be the most challenging since the recession, as it reported rises in both full-year revenues and profits today.
Next reported a five per cent increase in underlying profit before tax, totalling £821.3m from £782.2m last year.
Operating profit rose by almost the same level, 4.9 per cent, to £851.8m (from £812.1m in 2014). Next Retail saw growth of 4.8 per cent to £402.1m, while Next Directory grew by 7.5 per cent, bringing total growth for the Next brand to 6.2 per cent.
Overall sales were also up by 3.7 per cent, with 1.1 per cent growth from Next Retail outpaced by growth from the Next Directory which climbed by 7.7 per cent.
The retailer's share price was rocked by warnings of a tough 2016, dropping by 6.4 per cent (more than 420 points) as markets opened today.
Why it's interesting
Next is a hugely important indicator of the health of the high street and has been outpacing rivals such as Marks and Spencer for some years. So the fact its chairman, John Barton, has warned of challenges ahead should make anyone covering the retail sector sit up and pay attention.
What Next said
"2016 will be a challenging year with much uncertainty in the global economy. For Next it makes it particularly important that we remain focussed on our core strategy of delivering long term sustainable growth in EPS, investing in the business, improving the design and quality of our products and returning surplus cash to shareholders," chairman John Barton said.
"We have continued to invest in the business, spending £151m on new stores, a new warehouse and systems. In addition, we changed the credit terms for our Directory customers, which increased Directory debtors by some £215m. As a result, net debt increased to £850m, well within our bond and bank facilities of £1.3bn."
What analysts said
"Ahead of today’s finals from Next, the 2 key questions were how cautious CEO Simon Wolfson would be about the trading outlook for Next Directory and whether he would put his views on Brexit in the statement. Well, he wisely avoids anything controversial, but the tone otherwise is set by the early headline in the press release about “The year ahead may well be the toughest we have faced since 2008” and at the end of the statement expected Next Brand full price sales growth for the full year is downgraded to between -1.0% to +4.0% (with a mid-point of +1.5%), with full-year profits growth expected to be between -5% and +5%," Nick Bubb, of the Daily Retailer, said.
Next may have put out some solid results for the year behind it, but investors will be concerned by what it says for the year ahead.