Next’s success contains hard lessons for John Lewis partnership
S elf-examination in retail-land comes in different forms. At the John Lewis Partnership, management is contemplating the previously unthinkable and wondering whether to look for an outside investor to take a minority stake. Over at FTSE 100 firm Next, long-serving chief executive Lord Wolfson opened his annual sermon for shareholders by asking whether the clothing retailer had reached maturity.
While Next’s 20-year financial record is still terrific (compound annual growth in earnings per share of 14%), the more recent performance has been “unexciting in absolute terms,” judged Wolfson. The compound rate over the last eight years will be only 5.4% if this year’s forecast of a fall in pre-tax profits from £870m to £795m proves correct. It has been “an uphill battle,” he says.
The good news for shareholders, despite a 4% slip in the share price on Wednesday, is that Wolfson likes the look of the terrain beyond the next incline. “The group has far more ideas and opportunities for long-term growth than it has had for some time,” he reckons.
One can see what he means. Despite the impression of ubiquity, the Next brand isn’t necessarily at a saturation point in the UK – the share of the women’s clothing market is 6%. Meanwhile, rents in shops may finally have caught up with the rise of online shopping. More importantly, Next’s new adventures and experiments may finally be big enough to make a difference.
The first is online expansion overseas, where Wolfson reckons there are wholesaling and licensing opportunities in the US and Asia, places where dispatching individual packets to shoppers from a UK warehouse makes little sense. Second, there’s scope to boost Label, the bit that sells third-party brands such as Ted Baker,
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