Nick Bubb's Verdict: Next - Don’t mention the weather?

The standard advice for retailers trying to explain away weak trading is not to blame “the weather”, so why did Next fall into that apparent trap today?

For a company that normally eschews such short-term variances as shifts in the weather, Next are making a bit of habit of mentioning the weather in their current trading statements. Six months ago, at the time of the interims, Next flagged a slow start to the autumn season because of warm weather, which turned out to be just a blip.

And today, with the finals, Next has said that recent trading has been surprisingly quiet and that this may be due to the unseasonably cold weather. A cold March has, of course, not exactly been conducive to selling spring fashion ranges, so this actually does seem a reasonable excuse to make, particularly as the weather forecast for Easter is pretty poor as well.

The cold weather in recent weeks wasn’t the only mention of the weather by chief executive Simon Wolfson today, as in the presentation to analysts he flagged that the very poor weather in January had knocked between 0.3% and 0.4% off the cumulative 0.6% Next Retail sales growth achieved for the year up to Christmas Eve (the full-year outcome was flat Next Retail sales).

But Next has a January year-end, so it’s not too surprising that “the snow” hit High Street footfall in the last couple of weeks of the financial year and that there wasn’t time to catch up in February. At least “the snow” didn’t result in Next having to announce disappointing profits: far from it, as the underlying pre-tax profit for the year was at the top of the range at £622m. So Next didn’t fall into the trap that Debenhams recently dug for themselves by blaming the snow for a profit warning.

And over the years Next has built a formidable track record over the years in absorbing persistent like-for-like sales declines in Next Retail and yet still delivering impressive growth in overall sales and profits, thanks to the growth online (in Next Directory) and in new stores.

Next therefore has considerable goodwill to fall back on in the City and it is still hard to fault the strategy of returning surplus cash via share buybacks to boost earnings per share growth. That hasn’t worked for every retailer that has tried to emulate Next, which is a tribute to the strength of Next’s management and its business model. 

The outlook for new store growth was the other major theme of today’s presentation by Next, as Simon Wolfson vented his spleen on the “luddite intransigence and incompetence” of the local authority planners who are holding back planning permissions for new out-of-town stores. The planners in Sheffield were the particular focus of his ire, as they had rejected the Next plan for a new Home and Garden store (like the very sucessful store in Shoreham on the South Coast).

But the good folk of Hedge End near Southampton will be getting a splendid new Next Home and Garden store, with some impressive architectural features, in spring 2014 and it should be another great money-spinner for Next. What the weather will be like next spring is unclear, but it is to be fervently hoped that it won’t be as cold as this spring.