Next’s profit upgrade this week – the retailer’s second so far this financial year – has been powered by online sales, enabling it to steal further market share from rivals such as Marks & Spencer.
Next is now guiding that profits will rise by 11-17% for the year to the end of January 2015, to between £775m and £815m, up from the 8-14% previously predicted in April. Turnover is now expected to be 7-10% higher than last year, up on prior estimates of 5.5%-9%.
This came on the back of strong first half results published this week, with total sales up 10.7% for the 26 weeks to July 26.
Much of this was driven by online sales, with its multichannel division Next Directory growing turnover by 16.2%. Store sales were up 7.5%.
Julie Palmer, a retail expert at Begbies Traynor, said Next’s online business was “key” to its success and highlighted it as a main component in outperforming its competitors.
“A lot will be riding on its strategy towards the build-up to the lucrative Christmas period, particularly in the face of Marks & Spencer fixing initial issues with its new online offering,” she added.
Anusha Couttigane, retail analyst at Conlumino called the Next Directory the “jewel in the company’s crown”. She highlighted a forthcoming blogger competition called #ChangingRoomSelfie as an example of Next’s multichannel initiatives.
“Crucially, the success of the campaign will help to secure a generational influx of custom from younger shoppers for a retailer that has historically relied on a more mature middle-market consumer,” Couttigane said.
Verdict Retail analyst Honor Westnedge agreed. “Next is wise to what areas it should invest in. It is very careful about cost control and it has really set the bar on the high street with its multichannel strategy leading it to steal market share,” she said. “Its click and collect service and reliability of its delivery have also driven footfall in store.”