Next has thrown down the gauntlet to John Lewis and Marks and Spencer with plans for up to 19 mini department stores over the next three to four years
Next has identified a “wish list” of 19 sites for the 30,000 to 40,000 sq ft stores, the majority of which are in the south of England, after the success of its first fashion and home store in Shoreham.
However, Lord Wolfson, chief executive, said most of the new stores, which would be out of town or on the edge of towns, would require some form of planning permission.
Consequently, he expected that “of the 19 stores, we will open three-quarters over the next four years.”
The fashion and home stores would be closer to John Lewis than to Homebase, he said. Next will open two more of the mini department stores this year, near Ipswich and Warrington.
However, he insisted that Next would not close city centre stores to accommodate the new format.
While Next’s online sales topped £1bn for the first time, and it closed 14 stores last year, Lord Wolfson said: “We believe that for Next, the retail environment is an essential part of our home shopping service. One-fifth of the goods ordered from home are delivered to store, and more than half of our returns come back through stores.”
The comments came as the surge in online sales lifted Next’s full-year sales from £3.45bn to £3.5bn, while underlying pre-tax profit from continuing operations rose from £543.4m to £570.3m.
Lord Wolfson also said Next was poised for a £5m-£8m sales boost from the relaxation of Sunday trading laws this summer, and could benefit by £40m-£50m a year, or 1 per cent of sales from stores open at least a year, if the Sunday trading laws were relaxed fully.
A prominent Conservative party supporter and donor, Lord Wolfson said there was “some really good news on the horizon for the UK consumer,” as inflation was expected to fall back in line with wage growth later this year. However, there remained risks over employment, and the availability of credit.
Lord Wolfson, who said a year ago that retail would resemble “walking up the down escalator,” said on Thursday: “The escalator is still moving downwards, but maybe not at the same speed”.
A final dividend of 62.5p (53p) takes the total for the year to 90p (78p), payable from diluted earnings per share of 275.1p (216.5p).
● FT Comment
Once again, Next has produced a creditable performance in a difficult market. It forecasts pre-tax profit in the year to January 2013 of between £560m and £610m. The shares, which fell 1p to £29.14, trade on a forward p/e of 11.2, in line with Marks and Spencer. Despite the 50 per cent increase in the shares in the past 12 months, this still looks harsh, given further potential from Next Directory, and more than £200m of free cash, which Next will use to buy back shares.
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