Next is one of few British retailers that has reported a profit of more than PS1 billion. The retailer’s pre-tax figures for the January year ended at PS1.011billion.
The high-street fashion retailer is now in the same league with Tesco, Marks & Spencer and B&Q’s owner Kingfisher.
Full-priced sales grew by 5.8%, while total sales jumped 8.2% to PS6.3 billion.
NEXT’s share price jumped by more than 8% after the announcement.
For its outstanding performance, the retailer attributes it to a robust consumer demand as well as strategic business decisions.
NEXT increases profit forecasts for the current year
Buoyed by stronger-than-expected trading in the first eight weeks of the new financial year, Next has raised its profit forecast for the current year by PS20 million to PS1.07 billion, an expected 5.4% increase.
It also increased its projections for sales growth. The firm now expects a 5.5% rise in sales total and 6.5% in sales at full price, as opposed to the previous estimate of only 3.5%.
Simon Wolfson, the chief executive of Wolfson Group Limited (PS), said that reaching a PS1-billion profit mark would not change their disciplined business approach.
Investors were told that “reaching any level profit is not an excuse to be less strict in the way we run our business.”
Wolfson emphasized that Next’s long-term success depends on maintaining a strict cost management system, margin management and allocation of capital.
Wolfson warns against economic risk
Wolfson downplayed the importance of the 1 billion PS profit milestone despite the financial success achieved by the company.
To some it might seem like a significant milestone or even cause to celebrate. He said that we do not agree with this view. Profits can also go up as well as down.
Wolfson’s strategy was illustrated by anecdote of an employee, who hoped Next’s PS1-billion earnings would allow for additional expenditure.
He said that a colleague who was frustrated by the budget constraints they had to work within told him, “Surely now, we are making billions, the company could buy me a laptop.” Buying the laptop might have been an excellent investment but reaching PS1billion profit doesn’t make it any more valuable.
Wolfson, rather than focus on profits milestones for the business, emphasized the long-term objective of increasing earnings per share (EPS), a figure that has increased twenty-nine times over the last three decades – from 22p to $636p.
Future challenges for retail recovery
Wolfson, in reflecting on the last year noted that the retail sector will be at a pivotal point by 2024.
He said: “It’s unusual for Next, but we started the year last year with an optimistic tone.
The company’s optimistic outlook was attributed to the stabilizing retail environment, the diminishing impact of pandemic and the ease in cost-of living crisis.
He acknowledged, however, that there are still broader risks to the economy.
We are still as optimistic about the business today as when we first started, even though the risk to the UK’s economy is increasing.
Next is confident about its business strategy but it’s also prepared to face potential obstacles posed by global economic uncertainty, inflation and consumer spending fluctuation.
The post Next stock rises by 8% as it joins PS1 Billion Profit Club; NXT sales soar as the update unfolds.
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