British Retailer Next Sees Customers Swapping ‘Volume for Quality’ – WWD
LONDON – Can retail price inflation make the planet greener by motivating people to buy less?
Next please, a British high-street retailer and digital marketplace, said it had noticed a change in the way customers shop, although it remains to be seen how inflationary pressures will shape consumer habits. consumption in the coming months.
In a bullish holiday deals update and outlook for fiscal year 2022-23, Next said that due to rising supply chains, transportation and labor costs, it plans to raise prices across its entire fashion and home brand portfolio in the new financial year that begins February 1.
Commodity Next prices will increase by more than 3.7% in the first half of the year and more than 6% in the second half of the year.
Next sells fashion and home goods through its own physical stores, and also distributes scores of men’s and women’s fashion, fragrance and skincare brands through the Next marketplace.
It has exclusive distribution deals with brands including Victoria’s Secret, Gap and Laura Ashley go home. Last year Next held a 25% stake in British fashion retailer Reissand invest with Peter Williams in re-launching the men’s clothing label Aubin, formerly part of the Jack Wills franchise.
In 2019, Next broke into the multi-brand beauty business, acquiring high-end retailer Fabled by Marie Claire.
In Thursday’s statement, the company said inflation will play an important role in 2022.
The company pointed to “unforeseen persistence” of higher freight rates in the second half of next fiscal year, along with some further increases in production costs.
Next said it was experiencing an increase in UK operating costs, mainly due to wage inflation and labor shortages in sectors such as warehousing and technology.
While inflation may be falling, Next says it is confident about raising its own retail prices even above the UK average because it sees customers being “choose to buy items for a little less, but at a moderately higher price – can trade volume for quality. “
Next also noted that inventory for the end-of-season sale was down 18 percent from two years ago, which was largely the result of better-than-expected sales for the period.
While the saying “buy less is better” is common among design brands, rental platforms and eco-consultations, it is rarely heard at the high-street, mass-market level. and fast fashion. Large retailers need to sell quickly, in bulk, to stay profitable.
Next plc admits that forecasting next year’s sales trends is unusually difficult, and the “float” in recent months has made forecasting even more difficult.
It says that there are many unknowns. Assuming there is no further disruption from COVID-19, Next said it remains unclear how rising inflation and other macro pressures on consumers will affect shopping habits going forward. how.
In its transaction update, the company said it still doesn’t know if a return to post-COVID-19 spending on overseas holidays and other social activities will reduce demand for the product. discretionary goods or whether current inflation for goods and services is essential and rising. mortgage interest rates, will reduce discretionary spending on clothing and home appliances.
Next even wondered if its own 6%-plus price increase in the second half of the year would dampen demand for its products — or encourage people to shop otherwise. The company simply said it was expecting “a harsher environment as we move through next year.”
While Next and other high street retailers may be staring at a cloud of question marks in 2022, the past few months have proven to be a boon for the retailer, in fact as good as the company has been. raised full-year profit guidance for fiscal 2021-22, with plans to pay a special dividend of £1.60 a share at the end of January.
The company said that in the eight weeks ended December 25, full-price sales were up 20% from the same period two years ago.
As a result, sales growth at full price for the current financial year will be £70 million, or 12.8%, higher than Next’s previous guidance for the period.
The company also boosted its full-year pre-tax profit under guidance by £22m to £822m, 9.8 per cent higher than two years ago.
For fiscal year 2022-23, which ends January 2023, the company said it expects original cost sales to grow 7% year-over-year and pre-tax profit to grow 4. 6% to £860 million.
In addition to the special dividend, the company said it plans to return to a regular pre-pandemic dividend cycle next year.
Perhaps because of fears of inflation and slower growth next year, the share price fell on the day and fell 3.3% to £77.70 in late afternoon trading on Thursday.
Hargreaves Lansdown, a financial services company, says Next’s pursuit of online, physical and marketplace retail is a winning formula.
Hargreaves said Next’s well-established online operations mean it could attract new customers when it shuts down, “and early signs that they’re holding on.” It added that the market represents “a lower-risk and high-return business that can translate into an impressive source of long-term growth.”
It added that “For now, Next looks pretty good, with high customer retention, growth opportunities, and mushrooming online sales. Something very rare in retail. “
https://wwd.com/business-news/retail/british-retailer-next-sees-customers-swapping-volume-quality-1235026407/ British Retailer Next Sees Customers Swapping ‘Volume for Quality’ – WWD