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Lord Wolfson of Aspley Guise has done it again. The Next boss delivered too many results for the Christmas trading period because he promised too little.
It’s a brilliant Wolfson playbook trick that seems to work every time: be extremely careful and then take the bright side.
More promisingly, Wolfson says trading for the full year, which ends this month, doesn’t look too bad despite the gloomy economic outlook, and has revised the outlook upwards by £20m to £860m.
Cautious outlook: Lord Wolfson estimates next price increases will peak at 8% this spring and fall to 6% in autumn as freight costs and factory prices continue to fall
Still, he remains cautious for the year to January 2024, suggesting sales and profits will decline, even though he predicts much lower inflation by then.
In fact, Wolfson expects Next’s price increases to peak at 8 percent this spring and fall to 6 percent in the fall as freight costs and factory prices continue to fall.
Lower cost pressures will also help Next maintain margins this fall rather than just covering costs, which has been the fear.
So is this warning another trick from Wolfson? That the trade won’t be too stingy after all?
No, he’s too smart to be snookered by his super-cautiousness, as he also points out that the current guidelines are almost exactly in line with those from last January, one that was considered overly cautious by many but is now proven to be realistic .
To be clear, he adds: “We’re only mentioning this because we’re concerned that some will look at our 2023 forecast and again assume we’re being overly cautious.”
It is worth noting his careful wording and attention to detail, one of the hallmarks of his extraordinary success in making Next the UK’s largest fashion and home retailer and the star of the High Street.
It’s also why Next, against all odds, has managed to stay ahead despite the cost-of-living crisis that has driven so many customers to lower-cost brands.
Even if the prices are slightly higher than elsewhere, at Next they know that they get their money’s worth. It’s a similar story with Greggs, B&M and Boots, which have also reported strong year-end sales.
Adding new brands such as Reiss and Victoria’s Secret to the online platform has also been a game changer, although the physical stores – particularly in retail parks – have also done well.
It just goes to show that a well-run business can be a winner, even though the High Street saw an average of 47 shops closed each day last year; a total of 17,145 stores during the year.
Investors were certainly pleased with Wolfson’s message, with shares skyrocketing to 6518p. Some analysts have a target of 7500p.
Those critics who accused Next of favoritism when the board appointed Wolfson, the son of former chairman David Wolfson, as CEO some 21 years ago, when it was a shadow of what it is today, should rejoice.
He has more than proven that it takes more than good DNA to run a great company.
Truncate Amazon
The popping of the tech bubble across the Atlantic is getting louder by the day. Amazon is the latest to cut 18,000 jobs, far more than announced at the end of last year, but still only a fraction of its 1.5 million workforce.
No division is safe: jobs are being cut in the retail division, human resources, the virtual assistant Alexa, the Luna cloud gaming platform and Lab 126, the operation behind the Kindle e-reader.
Future projects like the personal delivery robot have been scrapped. There is a ban on hiring staff while the expansion of warehouses has been halted for the time being.
There will also be job losses in the UK and Europe as the online shopping craze slows down sharply from lockdown levels.
Once the disruptor — and the pandemic savior for so many — Amazon is being disrupted. It should be concerned: over the past year its shares have halved and this week it took out an $8bn (£6.7bn) unsecured loan.
Rumors of Jeff Bezos returning as CEO are circulating. Bezos built Amazon on the creed that it knows what a customer wants before they do.
He has to do that again.
courting Stratford
Thank God! Sir Keir Starmer’s speech at Stratford was so much brighter than his usual wooden performances.
It was also rather cute: controlling so many industries in the regions – from cyber in Wales to life sciences in Glasgow – was an obvious ploy to court corporate.
Whether more will come out for him as a donor is another matter.
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