ii view: is Next now a play on global online retailing?

Second-quarter trading update to 5 August

• Full price sales up 9.2% compared to a year ago
• UK total sales up 2.8%
• International online sales up 36.9% (+23.9%:H1)

Guidance

• Now expects full-year full price sales to rise by 6.3%, up from a previous 5%
• Now expects full-year pre-tax profit of £1.24 billion, up from a previous estimate of £1.22 billion

ii round-up:

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

The Next Online business, including both UK and overseas, accounted for 59% of overall profits over the group’s last financial year to 31 January 2026.

The Next Retail or store business generated 19% of profits. The Consumer Credit or Finance business generated a further 16% of profits with most of the 6% balance coming from the relatively new Total Platform and Investment business, where it invests in and outsources the use of its online operations.  

For a round-up of this latest trading update announced on 5 August, please click here.

ii view:

Coming to the stock market in 2002, Next today competes against rivals such as Marks & Spencer Group (LSE:MKS), ASOS (LSE:ASC) and even clothes and homewares sold by supermarkets Tesco (LSE:TSCO) and Sainsbury (J) (LSE:SBRY). Headquartered in Leicester and a constituent of the FTSE 100 index, the retailer employs around 30,000 people. Investments made in and users of its Total Platform business include Reiss, FatFace, Joules and Cath Kidston.

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Geographically, the UK made most sales during its last financial year at 77%. That was followed by Europe at 14%, the Middle East 5%, Asia 1% and the rest of the world the 3% balance.

For investors, some of the forecast-beating growth in international sales has come from the release of pent-up demand in the Middle East given the start of conflict during Q1. Higher inflation resulting from the conflict may keep interest rates higher for longer or even require hikes, dampening consumer spending going forward. An estimated future price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap. The importance of the weather in impacting customer demand cannot be forgotten, while the eventual succession of CEO Lord Wolfson deserves thought given his importance to the company.

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To the upside, the retailer’s broad strategic drives include a move to become a global brand and retailer, the development of new brands, as well as growing the Investment and Total Platform business. A modest launch of its Kidswear offering on Amazon.com Inc (NASDAQ:AMZN) in the US has recently taken place. Group investment in stores, technology and warehouses is ongoing, while a focus on shareholder returns, now predominantly via special dividends, builds on an estimated ordinary future dividend yield of around 2%.

On balance, and while risks remain, impressive execution and a push overseas look to give grounds for longer-term optimism.

Positives:

• Product and channel diversity
• Majority of sales and profits generated online

Negatives:

• Uncertain economic outlook
• Chief executive considered key in prospects

The average rating of stock market analysts:

Buy