Prime Minister Boris Johnson may have been empty-chaired on his latest visit to Europe, but there’s one UK representative that is being welcomed in the EU and elsewhere overseas: fashion giant Next

Britannia definitely still rules the waves as far as Next’s sales and profits are concerned, but international markets are becoming increasingly important to the retailer.

Next, which generated group sales of just over £2bn in the six months to July, posted a 23% rise in international sales over the period, most of which came from online.

In January 2016 (Next’s year-end), overseas full-price sales totalled £195m for the full year. In January this year, they had reached £354m and by January 2020 the figure is expected to be £436m.

While still a small part of Next’s total business, the retailer believes the ongoing disruption of retail brings it an opportunity to become a disruptor itself on a global stage, driven by its online prowess.

Internationally, the retailer made £211.7m from online and £29m from stores over the past half-year.

“The big change over the last 12 months is that we’ve found more profitable ways of marketing”

Lord Wolfson, chief executive, Next

Next chief executive Lord Wolfson said at today’s results update: “Just as new brands have challenged Next’s incumbency in the UK, we are now challenging and enhancing traditional retail landscapes overseas.

“In overseas markets, we are the new kid on the block. We are selling through our own website and through overseas third-party aggregators.”

The Middle East is Next’s biggest overseas region by proportion of sales, followed by the EU.

Full price salesNo. of countries% of full price salesJuly 2019 £mJuly 2019 vs July 2018
Middle East 14 46% 97 +35%
Europe (EU) 28 33% 70 +21%
Europe (Non-EU) 5 13% 27 +5%
Australia and New Zealand 2 6% 13 +2%
Rest of the World (ROW) 21 2% 5 -8%
Total full price sales 70 100% 212 +21%

Wolfson told Retail Week that international momentum was building on the back of effective marketing. He said: “The big change over the last 12 months is that we’ve found more profitable ways of marketing. Three years ago it was all driven by organic growth. Now, about 35% [of growth] is driven by marketing. We’ve found ways of communicating with the right customers overseas.”

In the year to next January, overseas marketing spend will reach £11.2m, compared with £6m in January 2018.

The split this year will be £3.1m devoted to display, £3.4m on search, £4m on social and just £700,000 on non-digital – the latter down from £2.7m in 2018.

Most overseas customers’ orders are shipped from the UK, but there are also distribution hubs in Germany and Russia. The German hub serves northern Europe and has capacity to handle more countries than it does at present.

‘Middle-aged Asos’

So as it eyes international growth online, can Next become the Asos of middle-aged – or approaching-middle-age – customers?

The reasons why it may want to become so are obvious. In its first half to February 28, Asos’s international sales were £799.8m, dwarfing the £481.5m achieved in the UK.

And Boohoo, which is growing overseas on the back of US acquisitions, generated international sales of £113.7m in the quarter to May 31. Boohoo’s sales were up 27% in the UK but advanced 56% internationally.

And it is not just young shoppers that are a valuable online market, as evidenced by Boohoo’s recent acquisition of the Karen Millen and Coast brands. So why wouldn’t Next succeed in creating an online destination for middle-aged shoppers on a global scale?

There is potential, but Shore Capital analyst Greg Lawless says the extent of Next’s success will not become evident for a few years yet.

The fact that there are only two overseas hubs at present, and comments made to analysts that Next apparently does not see itself as being an aggregator overseas in the same way that it does in the UK, means international may not set the world alight in the immediate future. In fact, third-party sales account for just 8% of Next’s overseas sales. By comparison, just a third of Asos’ assortment is own-brand.

Lawless says: “What Next is doing is putting international on the radar. It’s trying to leverage the infrastructure it has. It’s growing in importance, but whether it is a game-changer remains to be seen.”

Looming Brexit, including the possibility of no-deal, are unlikely to derail Next’s international potential. Barring chaos at UK ports – a big if, and Next has shifted imports away from the Dover-Calais route to minimise the impact if that happens – the retailer expects ride out any turbulence.

It will pass on to consumers price cuts of 2% in the event of crash-out tariff relaxations, which will reduce its import duty costs by about £25m, and is well hedged with prices already agreed on 80% of stock for the first half of next year.

There is potential to tap into a variety of new markets and Next is unconcerned about its prospects within the EU post-Brexit.

Wolfson said: “As long as our ports continue to operate effectively, we do not believe that the risks of a no-deal Brexit pose a material threat to the ongoing operations and profitability of Next’s business in the UK or to our £233m-turnover business into the UK.”

While Britain’s Brexiteering Government has yet to pull off an international deal of any significance, perhaps Next will become a UK business ambassador.