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Next shows how online sales are growing faster at Label, its third-party brand business, than at Next

Image courtesy of Next

Next today showed sales at its its third-party brand business Label growing faster than those at its own Next brand, as it reported its figures for the first quarter of its financial year.

Online sales at its Next UK brand were 24% down on last year, and 23% ahead of 2019, while online sales at its fast-growing Label UK brand – which sells clothes from other brands – were 20% up on last year, and 106% up on 2019.

The update came in a first quarter trading update that showed Next group’s total full-price sales, including interest income, grew by 21.3% in the 13 weeks to April 30, compared to the same time last year, and by 19.5% on the same time in three years earlier, in pre-pandemic 2019. A year earlier, non-essential retail shops – including Next’s – had been closed for the third UK Covid-19 lockdown. That had the effect of boosting online sales generally, while hitting in-store sales hard.

In the first quarter of this year, Next group’s online sales fell by 11% compared to last year’s lockdown period, while its store sales grew by 285% – reflecting the fact that this year they were able to open. Overseas online sales were 12% down on last year and 47% ahead of 2019. When its Ukraine and Russia websites were excluded, overseas online full-price sales were 7% down on last year, and 60% ahead of three years ago.

Compared to pre-pandemic 2019, online group sales were 47% ahead while in-store sales were 8% behind. Total full price products sales were 22% up on last year and 21% ahead of 2019.

Looking ahead, the retailer now expects full-year sales to be about 5% up on last year – the centre point of a range that goes from 2% to 8% growth. Full-year pre-tax profits are expected to come in at £850m – 3.3% ahead of last year. That’s the central guidance in a range from £795m (-3.4%) – to £895m (+8.7%).

Next says that when its full-year results were published in March it expected to generate about £220m of surplus cash for investment. So far, it says, it has bought £107.5m of its own shares and spent £20m on minority stakes in a number of businesses, most notably JoJo Maman Bébé.

Commenting on the figures, Emily Salter, senior apparel analyst at data and analytics business GlobalData, says: “Though total online sales were down 11% year-on-year, this was driven by Next branded products (-24%) due to the switch to online experienced last year and the retailer’s already high online penetration, with total online sales an impressive 47% higher than Q1 FY2019/20. Conversely, retail revenue growth is massively inflated as it came up against a period of store closures last year, with sales via this channel down 8% on a three-year basis.

“However, this trend is to be expected, as even innovating and introducing new features in its stores cannot take away from the front-of-mind appeal that Next has built for its online proposition, especially its wide range of brands that makes it extremely convenient to purchase from.

“In some of its stores, Next increasingly resembles a department store, with a growing number of branded areas, including Reiss and recently GAP, as well as an increased focus on homewares and beauty. Though in some locations this will allow Next to further gain from the closure of Debenhams and John Lewis & Partners stores, there was a reason for these closures and the demise of the midmarket department store—they are simply not needed as much because of the rise of online marketplaces, like Nex titself.”

Next is a Leading retailer in RXUK Top500 research.

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