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Next Profit Gains as U.K. Retailer Surpasses M&S for First Time

Joan Smalls in Next's SS2014 lookbook | Source: Next
By
  • Bloomberg

LONDON, United Kingdom — Next Plc, the U.K.'s second-largest clothing retailer, reported a 12 percent increase in full-year earnings, making more money than Marks & Spencer Group Plc for the first time in the brand's 32-year history.

Underlying pretax profit rose to 695.2 million pounds ($1.1 billion) in the 12 months through January, the Leicester, England-based retailer said in a statement today. That exceeded the 665.2 million pounds earned by Marks & Spencer on that basis in its last financial year ended March 2013.

With a greater market value than its biggest competitor, Next now trails M&S only in terms of absolute sales, helped by a business model that’s adapted more quickly to the shift in consumer habits toward online shopping. While Next Directory has grown to become the U.K.’s biggest home-shopping business, M&S is still working to address past underinvestment.

“Our strategy remains the same, focused on our products, our profitability and returning cash to our shareholders,” Chairman John Barton said in the statement. “Nothwithstanding the continued pressure on the U.K. consumer, we anticipate another year of growth for Next.”

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Next rose 0.2 percent to 6,580 pence in London yesterday, valuing the company at 10.2 billion pounds. The stock has gained 59 percent in the past year, outpacing a 20 percent gain for M&S, which has a market value of 7.7 billion pounds.

Next’s pretax profit beat the 694 million-pound average of 19 analyst estimates compiled by Bloomberg. The retailer raised its earnings forecast in January, predicting an outcome of 684 million pounds to 700 million pounds.

‘Better Job’

The gain in holiday sales that led to the revised forecast drew praise from M&S Chief Executive Officer Marc Bolland, who said in January that Next did “a better job” over Christmas.

Bolland is now counting on a fashion collection for men and women and a new online platform to bring customers back to M&S, which has been a fixture on Britain’s shopping streets for almost a century longer than Next.

Next’s sales in the year rose 5.4 percent to 3.74 billion pounds. M&S had revenue of about 10 billion pounds in its last financial year, almost half of which came from food.

With more than 500 outlets across the U.K. and Ireland, Next is investing in new stores, which it says provides a boost to online sales.

Total sales under the Next brand rose 5.5 percent during the year. Sales at the retailer’s stores gained 1.7 percent, while revenue at the Next Directory home-shopping business increased 12 percent.

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Next raised the dividend 23 percent to 129 pence a share.

By Katarina Gustafsson; Editors: Celeste Perri, Paul Jarvis and Robert Valpuesta

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