Emily Salter, lead retail analyst at GlobalData, credits the rise in Next’s group sales to its strong international performance, with overseas full-price sales growing by 22.8%. This growth was driven by the success of the Next brand across its own website and third-party marketplaces.
Salter noted that the retailer has identified international sales as a “growth opportunity,” as online sales continue to rise and fashion trends across the world converge, aided by the influence of social media.
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However, she cautioned that the challenge lies in building brand awareness and ensuring the relevance of Next’s offerings in local markets. Currently, overseas sales are largely from Next’s own brand, but she believes the retailer’s successful branded approach in the UK could be replicated in some international markets.
Commenting on UK performance, Salter noted: “In contrast, the UK underperformed the group due to the poor weather in Q2, with total full-price sales up by 1.0%. This still represents a rise in Next’s share of the sector though, with the UK clothing & footwear market remaining negative throughout the first half of 2024.”
Salter expressed concern over the 0.9% decline in UK Next brand sales, attributing it in part to the weather but urging the retailer to evaluate the overall health and appeal of the brand.
She added that rising competition from M&S, which has improved the “fashionability and quality of its own brand,” is also a factor, particularly among younger shoppers and influencers.
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By GlobalDataNext first half (H1) results in brief
- Total group sales increased 8% from £2.73m ($3.62m) to £2.95m ($3.91m).
- Operating profit rose 6.9% to £491m from last year’s £459m.
- Profit before tax was up 7% to £452m.
Next acknowledged weakness in UK sales but said its offering had met three key objectives: newness, choice and quality.
The company also reported that its overseas business performed “exceptionally well” in the first half, with a 23% increase. This growth was driven by strong performance on its own direct-to-consumer sites and even greater gains through third-party aggregator platforms.
Additionally, in countries where it partners with aggregators, Next noted that its direct sales have also continued to grow.
In its report, Next outlined the company has evolved into focusing on three very different avenues of growth: “Our objectives are very clear: do everything we can to improve and broaden our product offers, continue to develop best-in-class infrastructure and maximise the profitable growth we can generate through these three new avenues.”
- The opportunity to grow the Next brand overseas.
- Leveraging its product creation skills to develop new brands and third-party licences.
- The generation of revenues from the total platform and its associated equity investments.
“We enter this new era in a more positive frame of mind with new avenues of growth and a more stable business. Retail sales have stabilised and, though the shift to online may not have run its course, its effects are much diminished; not least because Retail is a much smaller part of our business. The table below gives a clear picture of the shape of the Group’s expected revenues, profits and profitability for the full year,” Next stated.
In August, Next gave the wider fashion sector a “sense of optimism” after delivering a strong Q2 despite poor UK summer weather with an industry expert noting its own brand has taken a back seat as its third-party brands grew by 7.9%.
