The story of Next, the £12.5 billion retail giant, began 160 years ago in Leeds. The company, then known as Hepworth, was the first High-Street clothing chain to provide made-to-measure and ready-made tailoring.
Next’s transformation into a 21st century apparel and homewares powerhouse is an example of how to survive and thrive in an industry that has been changing at breakneck speed.
The company, which is number one in the British clothing market, is a leader on the high street, retail parks and on the internet.
Next sells not only its own brand, but also a host of others, including Gap, Laura Ashley, New Balance, Victoria’s Secret and The White Company.
The company maintains its tradition in tailoring and owns 72 percent of Reiss, the luxury chain known for its chic suits.
Next sells not only its own brand, but also a host of others, including Gap, Laura Ashley, New Balance, Victoria’s Secret and The White Company
Next shares – which are up 33 per cent this year – are the experts’ pick to invest in if you want to back big UK companies with the potential to shine globally
The company reported a 14 percent increase in half-year sales to £2.86 billion.
The following stocks – which are up 33 per cent this year – are experts’ picks to invest in if you want to back great UK companies with the potential to shine globally.
The company reported a 14 percent increase in half-year sales to £2.86 billion.
Analyst Richard Hunter of Interactive Investor called the figures ‘next-level numbers’.
He said Next “has an unparalleled understanding of the market in which it operates and its ability to seize new opportunities.”
This is in large part due to its long-standing CEO, Lord Wolfson, who is widely recognized as one of the most brilliant business brains in Britain.
In recent days, Next has acquired a 16 percent stake in the homeware brand Rockett St George, which includes the Grace Leopard Love Seat armchair in its range.
Other opportunities may lie abroad. Fashionistas beyond these shores have discovered Next Fashion and its international operations are seen as a pillar of growth.
Earlier this year, The Economist condescendingly opined that “Next is a boring brand and an exciting company.”
The magazine is free to be snooty, but a Next-haul, as promoted on Instagram or TikTok, seems to be catching on with younger customers in Europe and Asia.
Boring or not, Wolfson expects to make a profit of £1 billion this full financial year, even in a tough economic climate.
Much of Next’s success is down to its long-standing CEO, Lord Wolfson, who is widely recognized as one of Britain’s most brilliant business brains.
Like some other retailers, the city would view such talk as hype. Not Next: It tends to under-promise and over-deliver.
Expert Will McIntosh-Whyte of Rathbones Asset Management is optimistic.
He says: ‘The company is well positioned to benefit from a recovering British consumer – that is if the new government doesn’t destroy consumer confidence with their ominous narrative.’
Fellow expert Ben Preston of the Orbis Global Equity fund is also positive about Next’s prospects.
He notes: ‘Strong companies can often use difficult times to their advantage, and that is exactly what Next has been able to do.’
This ability to adapt to circumstances began to become apparent in 1987 when Hepworth changed its name to Next.
This move recognized that the future did not lie in scruffy formal wear, but in the Next fashion stores that had been established five years earlier.
These stores targeted younger women looking for suits for work that looked serious but stylish.
With Mrs Thatcher in number 10 and women making breakthroughs in male professions, the strategy came at the right time.
The stores were the creation of George Davis, one of the most important personalities in the British retail scene in the 1980s.
He then launched Per Una at Marks & Spencer and George at Asda.
His reign as CEO of Next between 1984 and 1988 was a turbulent period for the company, but he was a game changer.
This pattern of disruption resumed under Wolfson, aged 56.
He became CEO in 2001 in his mid-30s, after working on the Next floor for a while after studying law in Cambridge. Since then, shares have risen more than 1,000 percent.
He has deftly dealt with the retail attrition war that has claimed victims like Debenhams.
Rivals may have closed their stores, but Next has 460 stores and will open more.
It also has a sophisticated online offering built on the infrastructure of its mail-order business Next Directory, which was itself based on the old Grattan catalog empire.
Next is now offering to provide its expertise in distribution, returns, warehousing and website services to other retailers through its Total Platform division, founded in 2023.
These customers are so happy to pay a fee to be free of these responsibilities that this subsidiary is developing faster than expected.
Next regularly steps in to snap up struggling names such as clothing brand FatFace and furniture company made.com. Retail store sales account for less than 10 percent of profits
Next has invested so much in logistics, IT systems and software to accommodate Total Platform and the online shopping revolution that it now employs more people in the technology than in the product division.
As Wolfson puts it, “History has been given a boost, and now that it has moved forward, it seems unlikely that it will return.”
Aruna Karunathilake, portfolio manager of the Fidelity UK Select Fund, a long-time investor in Next, underlines the scale of the online switch.
He comments: “Most people think of Next as a physical retailer given their presence on our high streets, but in reality the retail store now makes up less than 10 percent of their profits.
All of this goes some way to explaining the respect in which Next is held.
Last month the company said it could close stores if it loses its appeal against a long-running equal pay claim. This did not slow the rise in the stock price. The assumption seemed to be that Next would follow its usual policy of closing stores with lower profitability.
Russ Mold of AJ Bell describes the management as ‘a showcase for running a publicly traded company’. He says Next “demonstrates clear, transparent reasoning for how it spends its money and the ability to manage expectations.”
Mold also emphasizes the “detailed guidance” that Next provides. The report and accounts are legendary in the city for their clarity; the documents produced by many other companies are impenetrable.
Then, on the other hand, she clearly explains her strategy and is not afraid to admit mistakes.
The company regularly steps in to snap up struggling names such as clothing brand FatFace and furniture company made.com.
Still, Wolfson maintains that this doesn’t mean Next is a conglomerate, suggesting it is more akin to a venture capital group.
In the ‘Big Picture’ section of the report and accounts, Wolfson sets out in detail the tasks ahead.
These pages hint at his thinking, which he otherwise keeps well to himself.
However, when he makes public statements, they are to the point.
For example: ‘We never list items in our stores purely based on price, but on quality.’
Investors appreciate this candor from the CEO, who sits in the House of Lords as Baron Wolfson of Aspley Guise.
As the son of Lord Wolfson of Sunningdale, who was chairman of Next in the 1990s, he could be seen as a beneficiary of nepotism. However, it is difficult to find someone who does not believe that he has more than earned his place.
There is respect for his expertise, but also for his quiet lifestyle. In his spare time, Wolfson, a father of three, enjoys gardening.
He also sponsors the £250,000 Wolfson Economics Prize. His wife Eleanor Shawcross was an adviser to former Prime Minister Rishi Sunak and George Osborne during his time as chancellor.
Wolfson is known to wear Next suits, although these days these can come from either Reiss or its own brand line.
Whatever he wears, at the relatively young age of 56, it’s unlikely he’ll get a look anytime soon, even though he’s the longest-serving CEO of the FTSE 100. Investors will be hoping this stays the case.
NEXT: HOLDING THE LONG TERM FOR FUTURE GROWTH
If you’re considering adding Next to your portfolio, don’t assume you’ll be making a killing anytime soon. This is a bet on economic recovery in Britain – and elsewhere in the world.
Next shares have risen 50% in the past five years to 9,742p. As a result of these gains, thirteen of the stockbroker analysts covering the stock rate it as a hold and four as a buy.
Rathbones’ McIntosh-Whyte is among those who argue the valuation may be too high. In other words, he thinks the stock price is high and may fall back, albeit in the short term.
Others have more self-confidence. Fidelity’s Karunathilake argues that Next is actually undervalued by the market, given its good return on capital and cash flow.
The shares are valued in line with those of other retailers. But Karunathilake claims this underestimates Next’s online capabilities, which will be the engine of growth.
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