Earnings release
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TradingStatement–7January2025 HEADLINES ChristmasTradingandFull YearGuidance-YearEndingJanuary2025 ● Inthenineweeksto28December,fullpricesales wereup+6.0%versuslastyear. Thisnumber 1 isslightlyflatteredbythetimingoftheend-of-seasonSale. Adjustingforthiseffect,underlying 2 fullpricesaleswereup+5.7%,whichcomparestoourpreviousguidancefortheperiodof+3.5%.● Theover-achievement adds £27mtofull pricesales,andincreasesourfull yearguidanceforGroupprofitbeforetax by+£5mto£1,010m. 3 ● Groupprofitbeforetaxisnowforecasttobeup+10.0%versuslastyear,andpre-taxEarningsPerShare(EPS)up+11.4%. Initial GuidancefortheYearAhead-YearEndingJanuary2026 ● Fullpricesalesgrowthforecasttobeup+3.5%.● Groupprofitbeforetaxforecasttobe£1,046m,up+3.6%.● SharebuybacksforecasttoenhanceEPSby+3.1%,resultinginpre-taxEPSgrowthof+6.7%. Theremainderofthisstatementisdividedintotwosections:Part1focusesonthecurrentyearandPart2givesguidanceforsales,profitandcashflowintheyearahead. 3 NEXTGroupprofitbeforetaxexcludes:(1)thecostofbrandamortisation,(2)theprofitattributabletosharesthatwedonotowninsubsidiarycompanies,and(3)anexceptional,non-cash,lossrelatingtotheclosureofourdefinedbenefitpensionscheme. 2 Lastyear’sreportingperiodcoveredthenineweeksto30December2023,whichincludedfivedayspost-Christmas,whensalesarepredominantlymarkdownsales(26-30December2023).Thisyearcontainsonlythreedaysofmarkdowndominatedsalespost-Christmas(26-28December2024).Thisslightlydistortsthecomparisonoffullpricesalesoverthesenineweeks.Fullpricesalesinthe57daystoChristmasEvewereup+5.7%ontheequivalentperiodlastyear. 1 FullpricesalesincludeallitemssoldinNEXTRetail,NEXTOnlineincludingthird-partybrands,andNEXTFinanceinterestincome,butexcludesSaleevents,Clearance,TotalPlatformcommissionandsubsidiaries’sales. 1
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PART1:THECURRENTYEAR Full PriceSalesPerformanceto28December2024Thetablebelowsetsoutthefullpricesalesperformanceforthenineweeksto28Decemberandfortheyearto28December. Therearetwoelementsofourperformanceworthhighlighting. Firstly,growthintheUKwasinlinewiththeperformancefortherestoftheyear,butOnlinesalesgrowthincreasedat theexpenseof growthinour Retail stores. Secondly, andunexpectedly,oursalesgrowthoverseasacceleratedintherunuptotheholidayperiod. Fullpricesalesbydivisionversuslastyear Q4:9weeksto28December Yearto28December OnlineNEXTUK +3.8% +3.6% 4 OnlineLABELUK +9.2% +7.5% 4 Total OnlineUK +6.1% +5.2%Retail -2.1% -1.1%Total UK +2.5% +2.5%OnlineOverseas +31.4% +23.9%TotalProductfullpricesales +6.3% +5.8%NEXTFinanceinterestincome +0.6% +2.7%Totalfullpricesales +6.0% +5.6% End-of-SeasonSaleStockfortheend-of-seasonSalewasup+13%versuslastyear,whichwashigherthanourgrowthinfullpricesales. Lastyear,oursurplusstockwasparticularlylowandithasreturnedtomorenormallevelsthisyear. Clearanceratesareinlinewithourexpectations. SalesandProfitGuidancefortheCurrentYearOur sales, profitandEPSguidanceforthecurrentyearissetoutbelowalongwithourpreviousguidance. ThisforecastassumesthatfullpricesalesinJanuarywillbeup+3.5%. Newguidance Previousguidance Guidanceforthefullyear2024/25 Fullyear(e) %Versus2023/24 Full year(e) %Versus2023/24 Fullpricesales £5.05bn +5.5% £5.02bn +4.9%TotalGroupsales (inc.markdown&investments) 5 £6.30bn +7.8% £6.27bn +7.4%NEXTGroupprofitbeforetax £1,010m +10.0% £1,005m +9.5%Pre-taxEPS 843.8p +11.4% 839.3p +10.8%Post-taxEPS 635.4p +9.8% 632.4p +9.3% 5 TotalGroupsalesarethesumoftotalsales(fullpriceandmarkdown)fromalloftheGroup’sdivisionsplusrevenuefromsubsidiarycompanies.Subsidiaries’turnoveriscalculatedusingourshareofoursubsidiaries’turnover. Forexample,weown74%ofJoulessoweinclude74%oftheirsalesinourtopline. 4 Analystsnote:TheoverallgrowthforourUKonlinesalesinQ3wascorrectlystated,howevertherelativegrowthofNEXTUKandLABELUKwasincorrect.Thiswasasaresultofreturnsassumptionsmadeatthetime.TherespectivegrowthratesinQ3ofNEXTUKandLABELUKof+7.8%and+8.0%shouldhavebeen+5.9%and+10.8%.Thishasbeencorrectedinthetable. 2
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CashGeneration, ShareholderDistributionsandNetDebtCashgenerationintheyearremainsstrongandweexpecttogenerate£670mofsurpluscash,afterdeducting interest, tax, capital expenditure and funding customer receivables, but before anyinvestmentsanddistributionstoshareholders.AsperourguidancegiveninSeptember,weplantoretain£75mofsurpluscash,reducingnetdebt,tocontributetowardsthepotentialrepaymentofa£250mbondinAugust2025. Cashflowandshareholderdistributions£m 2024/25(e) Cashgenerationbeforeinvestmentsandshareholderdistributions 670Investmentsinthird-parties (11)Ordinarydividends (258)Sharebuybacks (326)Reductioninnetdebt 75 We expect our net debt (excludingleaseliabilities) toclosetheyear at around£625m, whichcomparesto£700mlastyear. ShareBuybacksDuringtheyearwehavepurchased£302mofsharesatanaveragesharepriceof£95.25. Includingplanned buybacks for January, we expect share buybacks to total £326mfor theyear. Thesebuybackswillhavereducedthenumberofnetshares by2.8%sincethestartofthisfinancialyear. 6 Theearningsenhancementexpectedfrombuybacksinthecurrentyearis1.4%;thisislowerthanthe2.8%ofsharesretiredintheyearasaresultofthetimingofsharebuybacks. Total ShareholderReturnThecombinationofgrowthinpre-taxprofit(+10.0%)andtheeffectofsharebuybackslastyearandinthecurrentyear,isexpectedtoincreasepre-taxEPSby+11.4%. Theadditionoftheordinarydividendyield,wouldresultinaTSR(ataconstantP/Eratio)of14.2%. 7 Totalshareholderreturn-pretax 2024/25(e) Growthinpre-taxprofit +10.0%Enhancementfromsharebuybacks +1.4%Growthinpre-taxEarningsPerShare +11.4%Ordinarydividendyield 7 2.8%Pre-taxTotalShareholderReturnataconstantP/Eratio 8 14.2% 8 TotalshareholderreturnataconstantP/Eratioisourpreferredmeasureoftheunderlyingvaluecreation,becauseitfocusesontheunderlyingearningsattributabletoshareholdersalongwiththeirparticipationinthedividend. 7 BasedontheaveragesharepriceinFebruary2024,whichwas£83.90. 6 NetsharesaresharesinissuelessthesharesheldinourEmployeeShareOwnershipTrust. 3
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PART2:GUIDANCEFORTHEYEARAHEAD GUIDANCEFORSALES, PROFITANDEPS2025/26 Guidanceforthefullyear2025/26(52weeks) Fullyear(e) %Versus2024/25 Fullpricesales £5.22bn +3.5%TotalGroupsales(inc.markdown,subsidiariesandinvestments) £6.50bn +3.2%NEXTGroupprofitbeforetax £1,046m +3.6%Pre-taxEPS 900.2p +6.7%Post-taxEPS 676.0p +6.4% Full PriceSalesWehaveassumedthatfull pricesales,includingNEXTFinanceinterestincome,willbeup+3.5%.Forclarity,thesesalesexcludesalesinsubsidiariesandinvestments. FullpricesalesgrowthforecastintheUKandOverseasissummarisedbelow. Therighthandcolumnshowstheequivalentnumbersintheyearto28December2024. Fullpricesalesbydivisionversuspreviousyear 2025/26(e) Yearto28Dec2024 TotalUK(Online+Retail) +1.4% +2.5%OnlineOverseas +14.0% +23.9%TotalProductfullpricesales +3.7% +5.8%NEXTFinanceinterestincome +0.5% +2.7%Totalfullpricesales +3.5% +5.6% WehavebeencautiousinouroutlookforboththeUKandoverseas:● Webelievethat UKgrowthis likelytoslow, as employer tax increases,andtheirpotentialimpactonpricesandemployment,begintofilterthroughintotheeconomy. ● Weanticipatethatgrowthoverseaswillmoderatefromthe+24%wehaveachievedthisyearto+14%intheyear ahead. Inthecurrent year, overseas sales benefitedfroman+85%stepchangeinmarketingexpenditure,fundedbysomepriceincreases. Wedonotbelievewecanprofitablyincreaseouroverseasmarketingexpenditurebythesamepercentagenextyear,andexpectthegrowthtobecloserto+20%. Total GroupSalesTotal Groupsalesgrowthof+3.2%islowerthanfullpricesalesgrowthof+3.5%,mainlyduetoanexpectedreductioninmarkdownsalesinoursubsidiarycompanies. 53rdWeekThefinancialyearendingJanuary2026isa53-weekyear. Theguidanceaboverelatestoa52-weekperiodinordertoprovideadirectcomparisonagainstpreviousyears. Allsalesandprofitnumbersinthissectionaretreatedinthesameway. Theadditionofweek53willaddaround£20mofprofitbeforetaxwhichisreflectedinthe53weekcashflowforecastbelow. 4
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PROFITWALKFORWARDANDANALYSISThe table belowaims to give shareholders an understanding of howwecurrentlyexpect theeconomicsofthebusinesstochangeintheyearahead. Thetablewalksforwardfromourexpectedprofitinthecurrentyeartoourprofitguidancefortheyearahead. £mProfitbeforetax2024/25(e) 1,010 Profitfromfullpricesales,TotalPlatformandsubsidiariesProfitfrom+3.5%(£176m)increaseinfullpricesales +37AdditionalprofitfromTotalPlatformEquityandServices +4AdditionalprofitfromWholesalebusinessandNEXTSourcing +3Totalprofitfromfullpricesales,TotalPlatformandsubsidiaries +44 CostincreasesWagecostinflationandNationalInsuranceincreases -67Digitalandbrandmarketing(overandabovesalesgrowth) -7Technologyandother -7Totalcostincreases -81 CostsavingsandgrossmargingainsEmployeeincentives(returningtonormallevels) +24Warehouse,distributionandstoresimprovedoperatingefficiencies +23Electricityrate +13Bought-ingrossmargin improvementfrompriceincreaseofcirca1% 9 +13Totalcostsavings +73Profitbeforetax2025/26(e) 1,046PBTversus2024/25(e) +3.6% Standingbackfromthenumbers …Standingbackfromthenumbersthereisoneimportantmessage. WebelievethattheGroupcandeliversalesgrowthintheyearahead,andwecangrowprofitsinlinewithsales. Webelievethattheunusuallyhigh£67mincreaseinwagecostscanbeoffsetthroughacombinationof:● Operationalefficienciesandothercostsavings,and● Aonepercentincreaseinpricesonlike-for-likegoods,whichisunwelcome,butstilllowerthanUKgeneralinflation.Furtherdetailisgivenbelow. 9 Bought-ingrossmarginisthedifferencebetweenthecostofgoodssoldandthefull-pricesellingpriceofthegarment(i.e.marginbeforemarkdowncosts). 5
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ExpectedWageCostIncreaseAnalysisThelargestfactorinthetableaboveisthe£67mexpectedincreaseinthecostofwages. Thischangeisdrivenbyacombinationofgeneralwageinflation,theincreaseintheNationalLivingWage(NLW),thedecreaseinEmployerNational Insurance(ENI)threshold,andtheincreaseintheENIheadlinerate. ThechangestoENIandNLWdonotcomeintoeffectuntilApril;thefullyeareffectofthesechangesis£73m.ThetablebelowshowshoweachofthesefactorsaffectstheCompany’scirca£900m wagebillon 10 anannualisedbasis. TheincreaseintheNLWneedstobeviewedinthecontextofits88%riseoverthepastdecade(general inflationhasbeenaround35%). Thislong-termincreasemeansthatanyriseintheNLWtodayripplesthroughtoseveralofthepaylevelsaboveit. ForNEXT,maintainingappropriatewagedifferentialsbetweentheNLWandhigher-responsibility(orlessattractive)roleswillcostalmostasmuchastheincreaseintheNLWitself. NEXTWageBill £900m %wages Effectof‘normal’inflationat2.0%ontotalwages +£18m 2.0%EffectofNLWonpeoplecurrentlyearningNLW +£11mMaintenanceofwagedifferentials +£10mTotaleffectofNLW(overandabove‘normal’inflationof2.0%) +£21m 2.3% EffectofENIthresholdreduction +£20mEffectof1.2%increaseinENIrate +£6mTotalimpactofNationalInsurancechanges +£26m 2.9%TOTALNEXTWAGECOSTINCREASES +£65m 7.2%Wageinflationinthird-partyservices +£8mTOTALFULLYEARIMPACT +£73mCostintheyearendingJanuary2026 +£67m National InsuranceCostsOneofthefactorsthatmightbesurprisingisthescaleofthe£20mcostarisingfromthechangeinENIthreshold. ThetablebelowshowstheeffectoftheENIchangesonthreelevelsofsalaries:a£9,520ayearpart-timeNLWrole,a£22,310full-timeNLWrole,andasalaryof£60,000.ThechangeintheENIthresholdcreatesadisproportionateincreaseinthecostofpart-timeworkinstores. ThecombinedeffectofENIchangesandNLWwillincreasethecostoftheserolesby13%,asdemonstratedinthelastrowofthetable. EmployeeWage Part-time(16hrs/wk)£9,520 Full-time(37.5hrs/wk)£22,310 Full-time£60,000 Rateincreaseof+1.2% +0.05% +0.7% +1.0%Changeinthreshold +6.5% +2.8% +1.0%ImpactfromENIchanges +6.5% +3.5% +2.0% NLWincreaseandgeneralwageinflation +6.7% +6.7% +2.0%TotalimpactofNLW&ENIas%ofwages +13.2% +10.2% +4.0% 10 ExcludessubsidiariesandNEXTSourcing(whoseemployeesaremainlyoutsidetheUK). 6
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Mitigation-PricesWeintendtooffsetaround£13mofwagecoststhroughraisingprices. Thiswillrequireanincreaseof around1%insellingprices onlike-for-like garments over andaboveanyfactorygateprice 11 increases. Fortunately, we areseeing0%inflationinfactorygateprices. Soalthoughweareincreasingourbought-ingrossmargins,westill expectourpricestorisebylessthantheBankofEngland'stargetforinflationof2%.Consumers havecontinuedtoslightlyshifttheirpurchasingpreferences,buyingfewerentry-levelproducts and more items at the middle and top end of our price architecture. To beclear,consumersarenotnecessarilyspendingmoreoverall,butbuyingfewer,marginallymoreexpensiveitems. Webelievethatthistrendwill continueintonextyear. Soweexpecttheoverallaveragesellingpriceofourgoods(i.e.totalcashtakendividedbytotalunitssold)toincreasebymorethan1%, which will deliver labour cost savings across thebusiness (as mentionedintheparagraphbelow). Mitigation-Operational CostSavingsWebelievewecanmakeoperationalsavingsofaround£23mthroughimprovedworkingpracticesandotheroperationalefficienciesinourwarehouses,distributionnetworksandstores.Mostofthewarehouseimprovementscomeasaresultofnewmechanisation. However,someoftheanticipatedsavingscomefromtheincreaseinaveragesellingpricesmentionedabove. Higherunitsellingpricesreducethecostofhandlingeachunitrelativetoitsvalue,andindoingsoreduceoperationalcostsrelativetorevenues. 11 Itemsthathavenotchangedfromoneyeartothenext. 7
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CashGeneration,ShareholderDistributionsandNetDebt Inthe53weeksto31January2026,weexpecttogeneratearound£665mofoperatingcashflowafterdeductinginterest,tax,capitalexpenditureandfundingcustomerreceivables,butbeforeanyinvestmentsanddistributionstoshareholders. Despitetheexpectedgrowthinprofit,thisvalueisforecasttobe£5mlowerthantheprioryear,primarilydueto:● £31mincreaseincapitalexpenditure,themajorityofwhichisfornewRetailstoreopenings.● £23mone-offcashoutflowfrombringingin-housethefundingofinterestfreeloansforRetailfurniture(thesewerepreviouslyfundedbyathird-party).Wehaveassumedwewill payordinarydividends of £276m,andreturn£314mtoshareholdersthroughsharebuybacks. Weestimatethatthesebuybacks,alongwiththoseinthecurrentyear,willenhancepre-taxEPSby+3.1%. Afterpayingordinarydividendsandcompletingourplannedsharebuybacks,weintendtoretaintheremaining£75mofsurpluscash,furtherreducingournetdebt. Cashflowandshareholderdistributions£m 2025/26(e) Cashgenerationbeforeshareholderdistributions 665Ordinarydividends (276)Sharebuybacks (314)Reductioninnetdebt 75 EquityInvestmentsThesenumbersassumethatwedonotmakeanysignificantequityinvestmentsintheyearahead,whichmaynotbethecase. Wecontinuetoactivelyseekprofitableopportunitiesthatmatchourinvestmentcriteria. Itislikelythatwewouldfundanysuchacquisitionsthroughareductioninoursharebuybackprogramme. MaturityofourAugust2025BondInAugust2025,our£250mbondwillmature. Withinourcurrentguidancewehaveassumedthatwewillretain£75mofsurpluscashinordertosettlethis£250mbondfromwithinourexistingcashfacilities,whilstmaintainingcomfortableoperatingcashheadroomthroughouttheyear. Subjecttomarketconditions,wemaychoosetoissueanewbondin2025whichwouldallowustodistributemore surplus cash to shareholders. Our objective, either way, is to maintain the Company'sinvestmentgradestatus. Total ShareholderReturnThecombinationofgrowthinpre-taxprofitandsharebuybacks,isexpectedtoincreasepre-taxEPSby+6.7%. Theadditionoftheordinarydividendyield ,wouldresultinaTSR(ataconstantP/E 12 ratio)of9.2%. Totalshareholderreturn-pretax 2025/26(e) Growthinpre-taxprofit +3.6%Enhancementfromsharebuybacks +3.1%Growthinpre-taxEarningsPerShare +6.7%Ordinarydividendyield 12 2.5%Pre-taxTotalShareholderReturn(ataconstantP/Eratio) 9.2% 12 Basedonasharepriceof£100. 8
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FULLYEARRESULTSANNOUNCEMENTWearescheduledtoannounceourresultsforthefullyearending25January2025onThursday27March2025. ForwardLookingStatementsCertainstatementsinthisTradingUpdateareforwardlookingstatements.Thesestatementsmaycontainthewords“anticipate”, “believe”, “intend”, “aim”,“expects”,“will”,orwordsofsimilarmeaning.Bytheirnature,forwardlooking statements involve risks, uncertainties or assumptions that couldcause actual resultsorevents todiffer materially fromthoseexpressedorimpliedbythosestatements. Assuch, unduerelianceshouldnotbeplacedonforwardlookingstatements.Exceptasrequiredbyapplicablelaworregulation,NEXTplcdisclaimsanyobligationorundertakingtoupdatethesestatementstoreflecteventsoccurringafterthedatethesestatementswerepublished. Date: Embargoeduntil07:00hrs,Tuesday7January2025Contacts: JonathanBlanchard,ChiefFinancialOfficer(analystcalls)NEXTPLC Tel:03337778888AlistairMackinnon-MussonRowbellPR Email:next@rowbellpr.comTel:02077175239Photographs: https://www.nextplc.co.uk/media/image-gallery/campaign-images 9