Next signals a return to basics, but ‘we must not become too conservative’

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It’s tough being cool. Retailer Next seems to think it’s possibly too tough, particularly after its first drop in annual profits in eight years and concerns that 2017 will be another challenging year on the high street.

In its results for the year to the end of January today, the retail stalwart said that its earlier efforts to adopt “exciting new trends” has taken too much focus away from “our best-selling, heartland product”. These, it says, are the “easy to wear styles” that can be bought in bulk.

It says:

We identified this issue in January. Corrective action is relatively straightforward and began in late January. We believe that some of these changes will begin to be reflected in our Summer ranges from May onwards, but we will not have our ranges where we want them until the Autumn season.

But it doesn’t want to get too dowdy:

Going forward we will continue to build on what we have learnt about the rapid development of new products and the delivery of new trends, with the proviso that those trends must be delivered in a way that all our customers can easily buy into. In re-balancing our ranges, we must be careful not to become overly conservative and throw away the excellent progress we have made in moving our buying processes forward.

The company’s profits for 2016 were £790.2m, down by 3.8 per cent on the previous year, with profits from the retail division down a particularly hefty near 16 per cent, though directory profits rose 9.6 per cent.

With online sales increasingly important, it is also looking into whether bricks and mortar make sense over the long term. For now, it believes physical shops are here to stay. But it says:

With increasing amounts of business being transferred online, it is legitimate to question the long term viability of retail stores and whether the possession of a retail portfolio is an asset or a liability. We believe that our stores represent a valuable asset and will continue to do so. However, in the unlikely event that like-for-like retail sales continue to decline at high rates for the next ten years, we believe that our lease structure is such that the portfolio could be managed down profitably.

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