Nick Bubb's verdict: Getting excited about wage rates and debtor levels?

Next’s estimable chief executive, Simon Wolfson (aka Lord Wolfson of Aspley Guise) has seemed ever so slightly bored when giving his usual detailed results presentations of late, but if that gave rise to speculation that he might soon want to go off and do something different, then it was clear after today’s interims that he is very much focused on the job in hand.

Given the recent debate in the sector about the cause of the dull trading in August in the high street, one might have expected Wolfson to launch into a tour-de-force today on the economic and political outlook and the theoretical impact on consumer spending on goods and services of real income growth.

But there were no jokes about politics in today’s presentation. In time-honoured fashion, Wolfson did everything himself, with the only look-in for the excellent new financial director, Amanda James, coming in the Q&A (via the answer to a question about dollar hedging rates).

The first subject to energise Wolfson was a highly detailed focus on the impact on wage costs of the increase planned in the National Living Wage, having been probably the only person in the country to have read through Appendix B of the Office of Budgetary Responsibility’s July Financial Outlook.

And noting that the impact of cascading the mooted 4.5% annual wage inflation through the hierarchy of shop management could cost the business £147m in 2020, which would force Next to put its prices up by 6%, certainly grabbed some headlines, even if it is unlikely to come to that.

Credit business

The second subject to engage Wolfson was the trend in Next Directory’s lucrative credit account business, as the reduction in monthly minimum payments has had the unexpected impact of increasing debtor balances by £200m this year.

Next will finance this off its own balance sheet, without affecting the return of surplus cash to shareholders, but in theory, if there is no change in bad debt experience, the extra interest income from the higher debtors will be very useful.

In practice, Next has decided to reinvest most of the gains in lowering its APR to 22.9%, to be more competitive with the credit card companies.

Despite all the time it has taken to analyse all these apparently abstruse issues, Wolfson has made sure that it is business as usual elsewhere and the success of the new store opening programme continues to impress.

For example, the new Next out-of-town store at High Wycombe is expected to take £15m in sales this year (versus the £13m forecast) and the site also provided a useful £5m land disposal gain in the first half. And, as planned, the overseas side of the Next Directory business continues to grow apace.

At a time when retail chief executives have many challenges and distractions, Next shareholders will be reassured to see the Next chief executive so focused and prepared.

• Nick Bubb is an independent retail analyst