Next says no plans for expansion despite record profits
Next has said that it does not anticipate “any material net change” in its retail selling space in 2024, despite posting record profits.
The retailer – which operated 458 stores as of January – said it will continue to open and close a small number of stores.
In 2023, Next renewed 56 leases, with an average lease term of 3.9 years. The retailer said the renewals reduced its annualised occupancy cash costs by £6.7m. The number of renewals was lower than Next’s estimation of 73 given in its half year results in September. The remaining leases are still under negotiation, with eight in the final stages of legal agreements while Next anticipates renewing the remaining nine in the first half of the year.
By the end of January, Next’s average lease commitment (weighted by value) was 4.5 years, compared to 4.7 years at the same point the previous year. 50% of its store leases (by value) will expire or break within 3.9 years, and 95% within the next ten years.
In 2024, Next expects to renegotiate 74 store leases, and based on its latest negotiations, the retailer expects to reduce its annualised occupancy cash costs by around £3m (-16%). The average lease term is expected to be 3.9 years, whilst the expected rent reduction of -16% is lower than what Next has achieved in recent years.
This comes as the retailer recorded an increase in group pre-tax profit of 5% to £918m in 2023, a record high which outperformed expectations by £3m.
Next said that over the past year it had focused on improving its product ranges and online service levels, managing costs and profitability, whilst also laying the foundations for future growth. The retailer also launched three new clients for its ‘Total Platform’, taking its total number of clients to seven.
Next also made a number of investments in 2023, increasing its equity stake in Reiss to 72% and taking a 97% equity stake in FatFace. It also acquired 100% of Cath Kidston’s intellectual property.
“In the context of the wider economic environment, the year to January 2024 was a very good year
for Next and the business materially outperformed our initial expectations”, said Michael Roney, chair of Next.
“The continued success of NEXT is built on the hard work, dedication and decision making of all the people who work for NEXT. I would like to thank them all for their contribution during the year; I have little doubt and much expectation that they will rise to the new challenges and opportunities that are presented in 2024”, he added.