Nick Bubb’s verdict: Next - Weathering the retail storm

Monday’s storm reminded us how extreme “the weather” can get, but today’s Next update reminds us how short people’s memories are about the weather.

The storm on Monday morning was rather better forecast than the one in October 1987 and so the damage and disruption was minimised and retailers will be pleased that it didn’t happen on a busy Saturday morning (because High Street footfall would have been badly impacted).

Clothing and footwear retailers will also be pleased that now that the storm has passed through we are currently enjoying a drier, brighter and cooler spell of weather, after what’s been a very mild month.

Now, if you asked the average man (or woman) on the street about the recent weather they would probably say that September was a very warm month and it is true that the end of September was warm. But, on average, September was actually a fairly unexceptional month.

According to the monthly overview of the retailing weather consultancy Planalytics, overall September was slightly cooler than normal with average maximum temperatures at 17 degrees against a norm of 17.5, although it was 0.7 degrees warmer than last year.

The month started out warm and dry, but the middle weeks saw temperatures drop below normal, and were accompanied by unsettled conditions for most of the country, before temperatures bounced back above normal at the end of the month. However, September was significantly drier than both last year and normal, with just two thirds of the normal rainfall.

As the cool period in September largely offset the warm period, Planalytics were hard pressed, on average, to find anything that moved the dial in terms of driving big shifts in product demand year-on-year, even though the shifts in the weather caused a lot of volatility for retailers within September.

All of which shows that people have very short-term memories when it comes to the weather, as it’s easy to forget that when Marks & Spencer launched its much vaunted Autumn fashion range with the “Leading Ladies” advertising campaign on around September 9th, there was a lot of comment on how lucky they’d been with the spell of autumnal weather at that time, with many lines selling out quickly.

As further evidence, the better than expected Q3 trading update from Next today (for the 13 weeks to Oct 26th) again contains their now famous weekly sales graph to illustrate the volatility of trading.

And the graph clearly shows that the 3 weeks of early/mid September were a very strong period for Next overall (Next Retail and Next Directory combined), although 3 weeks in the quarter were slightly down in sales compared to last year, including the final week of September and the final week of October. Over the quarter, Next probably saw average sales of a bit over £60m a week, but in the w/e Sept 14th and in the w/e Sept 21st total sales averaged £12m more than last year.

A year ago CEO Simon Wolfson blamed the slow start to Q3 for Next on unhelpfully warm weather in August and the distractions of the London Olympics etc, but flagged that sales were much stronger in late September and early October, so that Next finished the Q3 2012 period strongly, providing a tougher comp for Next in recent weeks.

It’s worth pointing out that Next have a growing Homewares business, which is benefiting from the revival in the housing market and in consumer confidence, so their recent performance is not a pure guide to fashion trading, but it certainly shows that well managed multichannel retailers with a strong business model can “weather” the retail “storm” caused by the boom in online trading.