Next has rung up £1bn in annual profits for the first time but warned of growing risks to the UK economy, saying big business could not afford to finance “excessive regulation” and government debt.
The retailer said pre-tax profits rose 10% to just over £1bn, before one-off items including a £15m pension charge, in the year to January after sales rose 8.2% to £6.3bn, led by strong overseas growth and sales of other brands.
Simon Wolfson, the chief executive of Next, said he now expected to make £1.06bn next year, £20m more than previously expected, as he said the first eight weeks of the new financial year had been “ahead of our expectations”.
Wolfson, who is a Conservative peer, said: “We are as positive about the company today as we were [a year ago], albeit in an environment where the risks to the wider UK economy are growing.
“We expect the UK tax rises in April to weaken the UK employment market and negatively impact consumer confidence as the year progresses.”
However, the group said it expected new technology in its warehouses to offset the rising cost of labour from higher national insurance and minimum wage costs.
Next said it expected the national insurance changes and the increase in the legal minimum wage to add £67m to costs and a new packaging tax to cost £6m. However, it said this would be partly offset by cost savings including running its shops and warehouses more efficiently, cheaper electricity and £13m from increasing prices by 1%.
Wolfson warned that the £1bn profit did not mean that the retailer’s shareholders “can afford to pay for Next’s unnecessary expenses” and that “big business was not “a few very rich people with ‘broad shoulders’; shoulders that can afford to take on the burden of paying for excessive regulation and government financing”.
He said in a lengthy statement: “Policymakers should not allow themselves to believe that burdening ‘big’ business does not impact the lives of millions of ‘ordinary’ people: it does – consumers through higher prices, workers through fewer jobs, and savers through lower pension income.”
Wolfson’s comments came as Next revealed that its own-brand sales in the UK were flat as sales fell in stores but increased online. The brand expanded overseas but most of the growth came from other brands Next now owns, such as FatFace and Reiss, and third-party brands that it sells online.
Next said it had not found any new brands it wanted to acquire during the year and had decided to offer an online warehousing logistics service to help use up spare capacity in its warehouses.
