Next – another solid performance

Next plc has announced results for the year ending January 2023:

Full price sales were up 6.9% versus last year, while profit before tax increased 5.7% to £870 million.
Profit before tax guidance for the year by £20m to £860m.
Next is cautious about the year ahead (to January 2024), forecasting sales to be down 1.5% and profit before tax down 8.7%, in line with previous guidance although the group expects selling price inflation to be more benign than previously thought.

Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, commented:

“This is another solid performance from the bellwether of the UK High Street, reinforcing Next’s reputation as one of the best run UK retailers.

Many other retailers have struggled in the current environment, but Next’s proposition is clearly resonating with the UK consumer. The removal of pandemic restrictions has certainly helped, leading to a strong recovery in store sales. But this shouldn’t take away from Next’s excellent operational execution.

Looking to the year ahead, the environment is set to get tougher. Next’s sales are expected to fall modestly, with profits down close to 10%, as cost pressures take their toll.

Next expects cost inflation to peak at around 7% in the spring summer season before falling to 3% in the second half. This is materially lower than previously feared, due in part to falling freight costs. It means Next doesn’t have to push through such big price increases, which in turn should support demand for its wares.

Overall, Next, and the rest of UK retail, are still facing a very difficult economy in 2023. But with inflation starting to moderate, things are not looking as bad as they were a few months ago.”

*Charlie Huggins owns Next shares in his personal portfolio.