ii view: Next looks ahead with confidence

Full-year results to 31 January

• Sales up 8.2% to £6.32 billion
• Pre-tax profit up 10.1% to £1.01 billion
• Net debt of £660 million, down from £700 million
• Final dividend of 158p
• Total 2024 dividend up 12.5% to 233p per share

Guidance

• Expects pre-tax profit to rise 5.4% over the year ahead to £1.07 billion
• Expects net debt during 2025 to reduce to £550 million

ii round-up:

Next (LSE:NXT) is a retailer of clothing and homeware products, selling both its own and other third-party branded goods.

The Next Online business, including both UK and overseas, accounted for 55% of overall revenues during this latest financial year. 

The Next Retail or store business generated 29% of sales. The balance came from the Consumer Credit or Finance business at around 5% and the relatively new Total Platform and Investment business, where it invests in and outsources the use of its online operations to others, at around 11%.  

For a round-up of this latest trading update announced on 27 March, please click here.

ii view:

Tracing its roots back to 1864, the retailer was founded as J Hepworth & Son, a gentlemen’s tailors in Leeds. Today it competes against rivals Marks & Spencer Group (LSE:MKS), ASOS (LSE:ASC), Associated British Foods (LSE:ABF)-owned Primark and Boohoo. A constituent of the FTSE 100 index, it employs more than 30,000 people. Investments made in and users of its Total Platform business include Reiss, FatFace and Joules. 

For investors, a potential global trade war could raise prices for products bought overseas. Sales for the group’s store portfolio retreated 1% during the year. The significance of the weather in potentially impacting demand cannot be forgotten. An estimated future Price Earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap, while the eventual succession of CEO Lord Wolfson deserves thought given his importance to the company.

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More favourably, seven years of change now sees the retailer focusing on becoming a global brand, developing new brands and growing the Investment and Total Platform business. A focus on costs is expected to see rising taxes and staff costs mitigated by reductions elsewhere, aiding management’s forecast 5.4% growth in pre-tax profits for the year ahead. Group investment in stores, technology and warehouses is ongoing, while focus on shareholder returns includes an estimated future dividend yield in the region of 2.3%.

For now, and despite ongoing risks, a push overseas for this well-managed company looks to support continued longer-term investor optimism.  

Positives: 

• Product and channel diversity
• Most sales and profits generated online 

Negatives:

• Uncertain economic outlook
• Chief executive considered key in prospects

The average rating of stock market analysts:

Strong hold