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Inflationary pressure may start to ease in 2012, Next PLC
28 Mar '11
5 min read
Retail in the UK is going to be different over the next few years. The consumer environment is likely to be dominated by the challenges of global inflation, public sector cuts and limited growth in consumer credit. These factors mean that retailers cannot plan for never-ending growth in like for like sales that many have enjoyed over the last fifteen years.
Yet NEXT and the retail industry can still deliver very healthy returns for their shareholders, but we will need to think differently about how we manage and grow our businesses. New avenues of growth, innovative ways to control costs and careful management of the healthy cash flows that retailers tend to generate will become increasingly important.
NEXT has a clear and consistent financial objective: the delivery of sustainable, long term growth in earnings per share. We believe that whatever the short term vagaries of the stock market, in the long run, it is the growth in earnings per share and dividends that will create shareholder value. Despite the difficult retail environment, this year we achieved 18% growth in EPS and increased our dividend by 18% - a performance that would be creditable in a sunnier economic climate.
New sources of revenue continued to support sales. In this respect, profitable new Home stand alone stores and growth in the NEXT Directory Online have been particularly important. As a result, despite the NEXT Retail like for like sales decline, NEXT Brand sales (excluding VAT) were up 0.3% on last year. This growth figure is a little misleading and understates the increase in the amount our customers spent with us. The year ending January 2010 was a 53 week year and the increase in VAT reduced reported sales by 1.4%. Adjusting for these two factors, 52 week VAT inclusive NEXT Brand sales were actually up 3.1%.
Operating profits rose faster than sales as a result of continued operational cost savings. Profit before tax was 9% up on last year at £551m. This is towards the top end of the range we gave in our trading statement in January 2011, it is in line with market expectations and consistent with the guidance we have given throughout the year.
NEXT continues to deliver strong cash flows, generating £92m of surplus cash after capital expenditure, interest, tax and dividends. We expect this inflow to double in the year ahead. Surplus cash has been used to buy back 10m shares, and the combined effect of cash generation and share buybacks (both this year and last) has been to boost EPS by 7.5%. Dividends have risen in line with EPS, up 18% to 78p per share.
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Yet NEXT and the retail industry can still deliver very healthy returns for their shareholders, but we will need to think differently about how we manage and grow our businesses. New avenues of growth, innovative ways to control costs and careful management of the healthy cash flows that retailers tend to generate will become increasingly important.
NEXT has a clear and consistent financial objective: the delivery of sustainable, long term growth in earnings per share. We believe that whatever the short term vagaries of the stock market, in the long run, it is the growth in earnings per share and dividends that will create shareholder value. Despite the difficult retail environment, this year we achieved 18% growth in EPS and increased our dividend by 18% - a performance that would be creditable in a sunnier economic climate.
New sources of revenue continued to support sales. In this respect, profitable new Home stand alone stores and growth in the NEXT Directory Online have been particularly important. As a result, despite the NEXT Retail like for like sales decline, NEXT Brand sales (excluding VAT) were up 0.3% on last year. This growth figure is a little misleading and understates the increase in the amount our customers spent with us. The year ending January 2010 was a 53 week year and the increase in VAT reduced reported sales by 1.4%. Adjusting for these two factors, 52 week VAT inclusive NEXT Brand sales were actually up 3.1%.
Operating profits rose faster than sales as a result of continued operational cost savings. Profit before tax was 9% up on last year at £551m. This is towards the top end of the range we gave in our trading statement in January 2011, it is in line with market expectations and consistent with the guidance we have given throughout the year.
NEXT continues to deliver strong cash flows, generating £92m of surplus cash after capital expenditure, interest, tax and dividends. We expect this inflow to double in the year ahead. Surplus cash has been used to buy back 10m shares, and the combined effect of cash generation and share buybacks (both this year and last) has been to boost EPS by 7.5%. Dividends have risen in line with EPS, up 18% to 78p per share.
Click here for more details
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