Next online sales up despite High Street slump
Written by Hannah McGrath
Online sales at Next soared 14.8 per cent in 2018, heading off a “challenging” year for the High Street retailer, which saw full price retail sales slide by 7.3 per cent.
The fashion and homeware retailer saw group sales across all areas down 0.4 per cent in the 12 months to January 2019 to £4.2 billion, broadly in line with guidance issued by the company at the start of the year.
Sales in Next’s stores fell nearly eight per cent to £1.95 billion, while online sales rose 14.7 per cent to £1.92 billion, prompting the company to observe that the growth in internet shopping represented a “long term threat” to the physical store retail model.
A 13.8 per cent rise in pre-tax profit for online sales balanced an overall decline of 21 per cent in pre-tax retail profits to £212.3 million, down from £268.7 million the previous year.
Overall group pre-tax profits were in line with expectations at £722.9 million, a fall of 0.4 per cent.
Total brand sales were up 2.6 per cent, prompting a lift of 2.5 per cent to total group sales to £4.22 billion, up from £4.11 billion in the previous year.
Next chairman Michael Roney said Next had delivered profits “exactly in line” with guidance issued in January this year and said the group would maintain this guidance in the year ahead.
However, noting the rapid consumer shift towards online, he added: “As anticipated, the year to January 2019 was challenging for Next as we continued to experience a structural change in our business, with sales continuing to transfer from our stores to online.”
Next has benefitted from increasing use of its online platform as a concession marketplace, with its own brand clothing and accessories featured alongside other brands’ to offer more consumer choice.
The report noted the wide-ranging structural changes generated by the growth in internet shopping. It stated: “It is a fact of life for those of us who are established High Street retailers that one way or another, less clothing, homeware, electrical goods and food are going to be sold on the High Street and more sold online.”
It said that the market conditions represent a “long term threat” to its store business “but potentially, a much larger opportunity for the group as a whole.”
Roney added that the group spent £129 million on upgrades and maintenance to systems, stores and warehousing in the 12 months to January.
An increase in the company’s net debt was driven by sales growth in nextpay, the company’s online credit business.
He concluded: “Even though the High Street looks set to remain challenging our online business continues to increase its contribution to sales and profit of the group."