Then, come retail giant Next, news of a great success! They announced a 13.8% rise in pre-tax profits, to £515 million for the six months ending in July. Next’s remarkable performance has turned it into a rather unlikely retail sector stalwart. Retail analyst Natalie Berg shines a light on this remarkable feat. In spite of the rosy numbers, the company is wading through some deep waters when it comes to the overall economy.
Profits were up this summer, due in no small part to that big weather boon. Competitor Marks & Spencer was hit by major cyber attack-related disruption, which would have helped our performance. These factors combined have granted Next to cash in on a huge boom in consumer spending this summer.
Next currently operates out of well over 500 stores throughout the UK and Ireland. Lord Wolfson, the chief executive and a Conservative peer, has adroitly steered the company through such stormy waters. Today, the company feels very good about where it’s at. They feel like they’re “in a good place” and have several opportunities to expand their base at home and overseas.
Though those profit numbers sound great, Next is battling increasing costs that still plague the retail industry. The company is far from immune to these financial pressures. As retail analyst Natalie Berg recently explained, inflationary pressures will make it difficult for retailers to invest in their businesses.
“They’ve been able to ride out the storm – but I think with these inflationary headwinds – that hinders a retailer’s ability to invest in stores, to invest in staff, and some of these costs will inevitably be passed on to consumers through higher prices.” – Natalie Berg
Clare Bailey, founder of the Retail Champion, commented on Next’s performance, describing the reported profits as “amazing… considering the current climate.” She shone a light on what a perfect storm of pressures retailers are under, from national insurance’s impact to the cost of rising wages.
“You’ve got all this pressure on an industry which is trying its best to survive.” – Clare Bailey
Despite these threats, Next has been proactive in preparing for potential economic downturns. The company raised concerns about a possible weakening in UK employment two years ago, indicating a cautious approach toward future challenges. In its statements, Next acknowledged that “the medium to long-term outlook for the UK economy does not look favourable.”
So even after Next’s recent plunge in shares — down over 6% in early trading on Thursday — Next have cause to feel bullish about their future. The company is open to opportunities for growth but is carefully navigating a complicated economic landscape rife with unknowns.