Next Plc, a prominent British clothing, footwear, and home products retailer, recently raised its fiscal 2025 growth expectations, showcasing its ambition for business expansion fueled by the strength of its online and international markets. The company has revised its annual growth projection for full-price sales to 4% and for total group sales to 6.6% for the year ending January 2025.
This is an increase from the previous estimates of 3.4% and 6%, driven by an unexpected surge in full-price sales during the first six weeks of the second half of the year, linked primarily to the back-to-school shopping season. In response to these promising figures, Next adjusted its pretax profit forecast to £995 million, reflecting an impressive year-on-year increase of 8.4%.
This revision marked a slight increase from the prior guidance of £980 million. Additionally, the company's earnings per share (EPS) is now estimated at £8.304 before tax and £6.257 after tax, up from previous forecasts of £8.188 and £6.165, respectively. Analysts at Bernstein pointed to not only better sales performance but also significant cost savings in areas like gross margin and warehousing as key contributors to this profitability upgrade.
"This year feels like the start of a new phase in the company's development. We anticipate delivering 9.7% growth in [pretax] earnings per share, a number we have not achieved for some time," stated a Bernstein analyst. Furthermore, Next has declared an increased ordinary interim dividend of £0.75 per share, up from £0.66 per share from the previous year, along with plans earmarking £306 million for annual share buybacks.
For the 26 weeks ended July 27, profit attributable to equity holders of the parent company showed a modest increase, climbing to £322.9 million from £321.8 million year-over-year. The robust performance of Next contrasts with the challenges encountered in store-based retail, where adverse weather conditions played a role in pulling down sales.
However, the retailer’s impressive growth in online and overseas businesses resulted in revenue growth to £2.86 billion, up from £2.52 billion previously. Full-price sales surged 4.4% while total group sales saw a remarkable 8% rise, reaching £2.95 billion in the reported half. Looking forward, Next is keen on boosting its growth within the UK through its wholly-owned brands and third-party collaborations, along with strategic investments.
In the international market, the retailer plans to focus on optimal execution and the establishment of solid third-party relationships, while also keeping an eye on the convergence of overseas fashion markets with that of the UK. In the forthcoming year, Next is set to develop its aggregation business, set to initiate trading with two new partners in Europe and offer an array of its non-Next wholly-owned and licensed products through aggregation partners.
Over the next five years, the company expects to invest in additional businesses and expand its total platform services, actively negotiating with several parties to solidify these partnerships. According to RBC Capital Markets, Next is positioned to keep benefiting from its extensive range and robust omnichannel offerings, supported by rapid, highly automated logistics and a well-established customer base.
The investment bank is optimistic that Next can effectively build its high-return Total Platform business for other brands, leveraging its advanced systems and online warehousing and distribution capabilities. They project that the company could achieve a greater rate of sales growth than the historic performance of 2%. In the stock market, Next shares experienced an uptick of nearly 3% during morning trading, reflecting investor confidence in its strategic outlook and growth potential..