Next hit its quarter century last week and celebrated with a lavish party in the imposing Thames-side surroundings of London's Somerset House. But just up the road in the City, stock market investors are not so happy.
Last week Next's shares lost 8% of their value in a single day after it announced a continued like-for-like sales decline. Clearly, investors think the retailer is failing to get back on track. Could they be right?
Chief executive Simon Wolfson, who has occupied the post for six years, has spent most of that time pursuing dramatic expansion. Since he took charge, Next has grown from 336 stores with 1.6 million sq ft of space and turnover of £1.6 billion to 480 stores, 4.8 million sq ft and £3.3bn of sales.
Now he is facing his first major challenge: how to ensure that shoppers will not tire of a brand that has become omnipresent on the high street. Over the past year he has put in place a range of measures to revive the retailer's product, stores and advertising, but so far to little apparent effect.
To be fair, spring 07 has not mirrored the slump of last year, when like-for-like sales fell 5.8% for the 15 weeks to May 13. This compares with a 2.7% drop for the same period this year, showing that even if the decline has not halted, it has slowed.
Then there is the weather. After the premature summer experienced in April, May's bad weather has stopped consumers' fashion spending as they reach for their knits and waterproofs. One industry source says this has led to a 20% slump in Next's like-for-like sales against last year.
But many in the industry, including Next's management, agree that customer ennui goes deeper than just a few cool and rainy days putting off shoppers.
Maureen Hinton, senior analyst at consultancy Verdict Research, says it is too early to make a judgment on Next's recovery process. "It has only really just started to refurbish its stores," she says. "In one store I visited recently, the window displays looked better and there was good product, but the store itself was still very unattractive and flat compared with other retailers. Loyal customers are still shopping there, which is why the Directory sales are up, but its problems are on the high street, where it faces more immediate competition from rival retailers."
Hinton adds that recent changes to its ranges, such as the forthcoming premium Signature range, show that Next knows it has to change its approach to product. "It should be a leader in the game, but instead it has become a follower," she says.
One source close to the company admits there is a lot of work to be done, not least in changing the buying culture and shaking up the way in which the design and buying teams work. "Next's success in the past in delivering great value has created a problem at the business. It got too focused on designing to a price and this probably became too important in the process. It needs to take a step away from that and concentrate on improving fabric and quality. If that means a coat being £70 rather than £60, so be it."
He says there is evidence that Next is now taking steps in that direction. "You can see this in the design approach for the autumn 07 collection, which it previewed last week," he says. "But the change is not going to happen in one season. It's a new way of working and the buyers and merchandisers will have to be bolder about backing the product. That confidence will come with successes and time."
The performance of the new ranges will be crucial to Next's fate over the rest of the summer season. According to industry sources, the retailer launched a recruitment drive last year to bring in new design talent, based at the London office. One source says that the benefits of the extra resources will only be felt later this year.
It is hoped that the new premium Signature collection - which will initially go into about 90 stores in late August, and will roll out to all Next's stores by Christmas - will act as a catalyst for wider, more important changes in quality and fashionability. According to sources, Signature is likely to encourage Next buyers to be more adventurous about backing fashion-led looks and better-quality fabrics in future. But insiders do not believe Next will segment the offer in the way that M&S has done with collections such as Per Una and Blue Harbour.
Alongside the changes in buying and design, making Next's stores more exciting is also a priority. Some £34m is being spent on refitting stores this year, representing 13% of its total space and averaging £52 per sq ft. This compares with the £80 to £90 per sq ft that Marks & Spencer said it was spending at its interim results in November, and suggests again that price may be taking precedence over design at Next.
As Drapers went to press, the retailer was set to unveil a new store at Bluewater shopping centre in Kent designed by Dalziel & Pow. The shop will feature 85% of the blueprint for new-look stores, with the first full refit store due to open at Sheffield's Meadowhall in August.
Karl McKeever, brand director of visual merchandising consultancy Visual Thinking, says it is hard to discern any progress in Next's stores so far, apart from new mannequins and less cluttered windows, as well as a refreshed website.
Having observed Next at close quarters over the past 25 years - McKeever first worked for the chain when it had 18 stores - he believes there is a cultural problem that needs to be overcome. "Next has always been a brilliant machine driven by process, and it has always been very good at repeating and refining the previous season's designs," he says. "But there is a sense that the machine that used to work so well has broken down."
That view, he says, also extends to its store interiors. "It is all very well talking about putting a new storefit into Bluewater, but Next has 300-plus stores that are not doing very well.
"It needs to have courage and vision. It will be interesting to see if it musters the nerve to do something radically different."
WHAT'S IN NEXT'S AUTUMN RANGES?
Drapers senior fashion writer Stephen Spear says:
"In womenswear, a much-needed fashion injection sees crochet smock tops sitting alongside floral print dresses for an on-trend yet sophisticated appeal. A floral smock top ticks the trend box for bold prints, but the purple and red shades are a touch more subdued than they would be in Topshop or H&M. A black and white striped satin blouse comes with a matching 1970s-style neck-tie, while a short-sleeved knit has rib panels in contrasting gauges.
"This is office chic that aims to create a basics-plus feel, offering quality with a nod to trends. It should be enough to lure back lost shoppers, but Next is playing catch-up and with so many other shops stocking similar styles, there is little to tempt new customers.
"In men's suits, the Italian wools are on a par with more expensive branded alternatives, while hidden adjustors on trousers and jacquard linings on jackets betray a meticulous eye for detail. Narrower lapels and slimmer fits are enough to lure the fashion-savvy without looking extreme.
"By concentrating on quality with a fashion edge, Next is competing for wardrobe share first and market share second, and the tactic may just work. It remains to be seen whether the preview ranges will find their way into stores, but this is the key issue - Next needs to be brave enough to back its hunches."
NEXT'S RECOVERY PLAN
- New logo for fascia
- £2 million spent on 5,900 mannequins
- New carrier bag designs
- Introducing Signature premium range
- New store format to be introduced at Bluewater in Kent this month, to be followed by another at Sheffield's Meadowhall in August
- First TV ad campaign in 12 years
- Annual advertising spend up from £1.5m to £10m.