Next boss Simon Wolfson is nothing if not succinct, and his summation of the position his business is in at the retailer’s interim results was characteristically pithy. “We are in the eye of the storm,” he said.
His family-centred customers are among the hardest hit by rising costs and mortgage rates and they are cutting back on discretionary spend, so where does that leave Next and other retailers serving the middle market?
Wolfson could see no improvement over the next six months and suspected his customers would continue to suffer the ongoing effect of cost increases until September next year, but he stressed that retailers should not lose sight of the fact that the downturn will not last forever. He maintained that one advantage of being in a low growth period was that you can focus on the detail and as a result become a smarter trader.
And smarter trading is the only thing that will get retailers through tough times. Next has conceded it will have to raise some prices by the second quarter of next year. Meanwhile, more sourcing will shift to north Africa, Vietnam and northern China to achieve better prices.
Wolfson believes that the growth of the value market is decelerating and that if there is any discernable trend in the way his customer is spending it is that they are buying fewer garments at higher prices. He wants Next to be perceived as being at the top end of the mass market, and thinks price integrity plays a key role in preserving the brand – which means, with the exception of its one weekend Sale, no move to in-season markdown. Wolfson, at least, looks set to hold his nerve until Christmas. How many others will be able to do the same?
Lorna Hall Executive Editor