Next makes more online than it does from its stores

The retailer had a good year in 2013, but founder Simon Wolfson warned the recovery is still delicate.

by Emma Haslett
Last Updated: 12 May 2015

We haven't heard much significant from Next for a while now, but the retailer has been quietly working on its online offering, and the result has been staggeringly effective: Next is one of the few traditional retailers where profits from online are now higher than from its bricks-and-mortar offering.

For the retailer, 2013 was a solid, dependable year: revenue rose to £3.7bn, up from £3.5bn the year before, while pre-tax profit rose to £695m, up from £622m the year before. Sales from its Directory arm - which includes online and the Yellow Pages-like Next Directory - rose to £1.3bn, from £1.2bn the year before, while high street sales stayed relatively flat, at £2.2bn.

Profits in the two divisions hit £359m and £348m respectively. Which just goes to show how much overheads on shops suck out of a business (although to be fair, Next does do click and collect, which requires the presence of a high street store...).

So well has the retailer done that its profits overtook Marks & Spencer for the first time ever - although that may say more about M&S' failings than it does about Next's achievements.

While founder and chief executive Simon Wolfson (Lord Wolfson of Aspley Guise to his friends) made the requisite noises about being optimistic about 2014, he also said something rather interesting: firstly, that credit is flowing back into the market (as the graph below, nabbed from Next's results statement, shows).

Secondly, that  that a recovery driven by consumer credit isn't really a recovery at all.

'If anything has been learnt from the last 10 years, it is that credit cannot continue to grow faster than wages forever,' he said.

'Until we see significant increase in the supply side of the economy (profitable investment and improved productivity), we cannot bank on a return to sustained growth.'

Which is a good point. Amid all yesterday's braying about how marvellously the coalition has done at fixing the economy, it's easy to forget that we're not out of the woods yet. Recovery is still very fragile.

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