Next [IRDX RNXT] Leading, Ted Baker [IRDX RTED] and Seraphine [IRDX RSER] all had full-year results out this week. We took a look at what these fashion retailers had to say about their multichannel strategies – and what that says about the development of digital commerce in the sector in the UK.
Online and the store
Next, a Leading retailer in IRUK Top500 research, reported revenue of £4.1bn in the year to January 2017. That’s 1.9% down on the £4.2bn reported at the same time last year. Next Retail sales, which take place in stores, came in at £2.3bn, 2.9% down on last year, while Next Directory sales, which are predominantly online, came in at £1.7bn, 4.2% up from £1.6bn last time. Profitability was also down in-store – by 15.8% – and up online (+9.6%). Overall, pre-tax profits of £790.2m were 3.8% down on the same time last year. Some 41% of Next’s retail sales were Directory – largely online – sales in 2016.
In his overview, Next chief executive Simon Wolfson said: “With increasing amounts of business being transferred online, it is legitimate to question the long term viability of retail stores… We believe that our stores represent a valuable asset and will continue to do so.” But, he added, if like-for-like retail sales did continue to fall at high rates over the next 10 years, its store portfolio “could be managed down profitably”.
Ted Baker, a Top250 retailer in the IRUK Top500, reported group revenue of £531.0m in the year to January 28, 16.4% up on the previous year. Pre-tax profits of £61.3m were 4.4% ahead. Overall retail sales grew by 15% to £400.7m, with online growing its share strongly. Ecommerce sales of £72.3m were 35.1% up on the same time last year, and accounted for 18% of retail sales. Chief executive Ray Kelvin welcomed “another good year of progress in Ted Baker’s expansion as a global lifestyle brand.” He added: “We have continued to trade well and develop despite a backdrop of on-going external challenges across our global markets.” It plans to continue opening stores in the year, with a focus on building brand awareness in Asia, and will invest in the customer experience online.
Sixty per cent of maternity wear label Seraphine‘s turnover is made online. It also has four UK stores, three in the United States, as well as stores in Dubai and Hong Kong, while it supplies department stores including Peter Jones and John Lewis via wholesale. Its group revenue hit £15.5m in its latest full year, 11% up on the previous year, while pre-tax profits rose to £2m from £1.5m last time. It says that while its strategy is to grow via ecommerce, “retail premises retain their popularity”.
Next launched mobile websites in the UK and Northern Ireland for all hand held devices, and improved its iPhone and iPad apps. It also adapted sofa selection and ordering for its mobile website, and enabled shopping carts to be saved across devices. Seventy per cent of its overseas customers will be able to use a mobile website by August, with the launch of 12 new international sites. Touch ID sign in is scheduled to be introduced for Next apps in August 2017, while fast checkout will be enabled by November.
International full-price sales made through the Next Directory grew by 18.5% over the year, compared to UK growth of 1.2%. The retailer now has distribution hubs in China, Russia and Germany, which it said were “working well”, allowing the retailer “to get our stock to
customers more efficiently compared to servicing orders from the UK network.” Wolfson added: “We now service our Polish business from the German hub, a service we will be extending to fourteen surrounding countries during the year. The China hub is operationally very efficient but the administration associated with importing stock into the country continues to be a challenge. During the year Next converged its UK and overseas websites in a move that will enable it to roll out new functionality and content across its websites more quickly.
Ted Baker said that while UK and Europe sales rose by 10.7% to £279.5m, US and Canada sales were up by 28.3% to £103.4m. International sales benefited from the weakness of sterling – when the results were reported in constant currency, UK and Europe sales rose by 8.4%, and US and Canadian sales by 13%. Of Ted Baker’s 490 stores and concessions worldwide, 98 are in Europe, 111 in the US and Canada, 80 in the Middle East, Africa and Asia and nine are in Australasia.
Seraphine says 70% of its sales are made overseas, and that its exports are benefiting as a result of the weak pound. It said that growth was robust worldwide, but strongest in the US and UAE. The lifting of its one-child rule, says Séraphine, means that “China is also proving to be fertile ground”.
Operations and logistics
Next rolled out parcel shop collection from 4,000 parcel shops during the year – and says 2% of its orders are now collected through those stores. In 2017 it plans to launch a subscription delivery service, Next Unlimited, for which customers will pay £20 for unlimited next-day delivery in the UK and Northern Ireland. One-hour delivery will also be available to customers for a £2 premium.
Ted Baker is streamlining its European logistics into a new UK distribution centre that will handle all operations for its retail, wholesale and ecommerce businesses in the UK and Europe.
Brand engagement through personalisation
Next cut its spend on print catalogues by £3.5m in a “rationalisation” of distribution. That, it said, offset a £6m increase in online marketing expenditure. Over the year it plans to use personalisation to make its online adverts more relevant to existing customers, so that existing customers don’t see recruitment ads, but do see ads that reflect their purchasing history, browsing and abandoned baskets. Its website will also be personalised.
The Brexit effect
Next made no specific mention of the UK’s decision to leave the EU in these results but Wolfson, who was a prominent supporter of Brexit, said in his review that this was a time of “significant uncertainty”, and that the last time the company was in a similar situation as in 2008, thanks to tough economic conditions, weakening currency and international product range issues. Prices rose by an average of 4% for the spring and summer ranges, and by less than 5% in the autumn and winter thanks to the devaluation of the pound following the referendum results. Wolfson said that if this proved a one-off devaluation, pricing pressure should ease in the second half of 2018.
Ted Baker said it had extended its hedging arrangements for US dollars ahead of the UK referendum in a deal that extends to April 2018. It also that the UK’s decision to leave the EU had increased the level of economic and consumer uncertainty, and that the group and its advsers would monitor the potential impact. In the last year, it said, the business had put in a good performance that was achieved “despite a backdrop of ongoing external factors which have affected trading across all our markets.” Those included a rise in discounting and a fall in international tourism in North America.
Seraphine founder and managing director Cecile Reinaud said: “Seraphine proves that the future of the UK is global. We have a talented, multinational team, a strong digital and physical presence and a business model that is fundamentally recession proof. We are very confident in our brand. It appeals to mums worldwide because it combines high fashion, practicality and the heritage that comes from its association with Royalty and rock stars”.
Mentioned in this piece…
Ted Baker is a British clothing retail company.
Ted Baker plc is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.
Ted Baker’s managing director, Ray Kelvin, started his first store in March 1988 in Glasgow, and opened further stores in Manchester, Plymouth, and Nottingham. (more…)