Next boss Lord Wolfson has created a reputation for economic forecasting that has made the fashion retailer a bellwether for the sector.
So there was something rather symbolic about the battering that the British Isles took from Storm Katie over the Easter weekend, only days after the retail chief predicted this year could be the toughest since 2008 – the year, lest we forget, when the world teetered on financial ruin.
“All evidence shows that we are going into a slowdown,” he told Retail Week – after unveiling a 5% uplift in full-year profits – as a slowing economy combines with consumers spending on experiences, such as restaurants and cinema visits, rather than fashion.
As if on cue, winds and rain whipped high streets up and down the country, and shopper numbers fell 10.5% on bank holiday Monday – on the back of a weak Saturday when visits to high streets and shopping centres dropped 6% compared with last year, according to Springboard data.
It’s worth noting that Wolfson has form for striking a cautious line and then over-delivering against weakened expectations.
“Next’s track record for exceeding expectations has as much to do with its skill in navigating the challenges it has continually identified early as it has with exaggerating the economic omens”
And Next’s improved margins are a case in point. The retailer, despite challenging conditions, delivered a 2.2% rise in full-price sales and an improved net margin for the year from 16.3% to 16.9%. Even Wolfson described that as “surprising”.
There are those who have suggested that, as it looks ahead, Next has chosen to factor in all its negative scenarios and leave any positive surprises as a means to deliver an upside.
But the company’s track record for exceeding expectations has as much to do with its skill in navigating the challenges it has continually identified early as it has with exaggerating the economic omens.
And, once again, Next has set out a robust plan to deal with the challenges and opportunities it faces, in particular confronting a slowdown in the growth in its Directory business, which has lost momentum, and an expansion of its international arm that will include the development of its overseas delivery hubs.
But it also aims to develop the Next brand by advancing buying and design capabilities and responding quicker to new fashion trends, investing in opening profitable new stores and keeping higher control of costs.
“It may well feel like walking up the down escalator, with a great deal of effort required to stand still,” Wolfson observed last week. “It will not be the first time we have felt this way, and our experience is that the effort put into improving the business in tough times can pay handsome rewards when conditions improve.”
That approach is what has so often set Next apart. The retail sector has as much to gain from understanding how Next will mitigate the latest set of challenges as it does from taking note of its chief executive’s outlook for the year.