UK retail bellwether NEXT reveals better than expected sales

NEXT doesn’t retail bicycles but its status in the UK high street has made it, arguably, a bellwether for the retail sector and consumer confidence in general. Its latest financials, released this week, turned up some positive findings for retail watchers to chew over.

Firstly, sales bucked expectations and were surprisingly strong. In the nine weeks to 20 December, full price sales were up +5.7% versus last year. That was £38 million better than its previous guidance of +2% for the period. NEXT has accordingly increased its full year profit before tax guidance by £20 million to £905 million, up 4% on last year.

NEXT’s financials also had an interesting finding on price inflation. Prices in the cycle retail space have sparked some fairly heated discussion. With some bike prices beginning to knock on the door of automotive prices, conversations have ranged from ‘are bikes too expensive’ to a broader acknowledgement that how bikes are sold is going to have to change if it maintains current prices. The other side of the price discussion has centred on the sector’s short term overstock problem, which has led to numerous sales and – arguably – the best time ever to buy a bicycle. Those cycle sector discussions aside, NEXT has seen cost price inflation in its own products diminishing, maintaining due to decreasing factory gate prices. The retailer said: “We believe that this will allow us to maintain zero inflation in selling prices, along with a small 5 increase in bought in gross margins.”

NEXT added: “This will be the first time in three years that input prices have been stable.”

On the less positive side, NEXT also referenced the problems in the supply chain thanks to disruption in the Red Sea and Suez Canal, with likely delays to stock should difficulties continue. That’s an issue which will undoubtedly affect the cycle market too, as well as many more, should it not resolve soon.

Just how much you can glean about the cycling market from a non-cycle related UK retail financial statement is up for debate, but there are nevertheless some positives and warnings for the broader retail picture to be gleaned here.

Image by khamkhor from Pixabay