“Retail in the UK is going to be different,” said Next chief executive Simon Wolfson as he underlined the rising importance of online and multichannel sales to its business. The Next Directory now generates 40% of the group's profits and 27% of its sales.
Next, reporting its figures for the year to January 2011, unveiled sales growth of 7.1% in the Directory, which trades primarily online and where turnover climbed to £935.5m from £873.2m.
The figure bucked turnover trends across the rest of the business, where store sales fell by 2.3% to £2.2bn and total group sales rose by just 1.4% to £3.45bn. Profits figures were more cheery, rising by 9% to £551m across the group. Directory profits rose to £221.9m from £183.6m.
Lord Wolfson said coming years would be “dominated by the challenges of global inflation, public sector cuts and limited growth in consumer credit.” That meant, he said, that retailers could no longer “plan for never-ending growth” in like-for-like sales. Instead they would have to explore new avenues of growth. Over the last year online has been one of those new sources of growth at Next, as have new Home standalone stores.
Multichannel purchasing trends were also key to growth generation. The company estimated the profit on items ordered online but collected in store was £47m in the last year, while customers buying instore with their Directory card generated some £16m of service charges earned by the Directory on resulting balances owed. An estimated £9m was saved by allowing directory customers to return goods through shops rather than by courier only.
In his review, Lord Wolfson said: “These benefits would not have been achieved if Next was simply a High Street retailer or a home shopping business. It is important to understand the benefits this integration provides.”