2011 and beyond part 1

The boom years for retailers are over for the foreseeable future according to the Next Chief Executive, Lord (Simon) Wolfson.

He expects growth of between 2-5% and given that Next also warns that a shortage of manufacturing capacity and a rise in the price of cotton will push up the price of its clothes next year between 5 and 8%, we are looking at unit sales to reduce.

Next are also looking to buy back 4 – 5% of it’s own shares every year as they feel that this will offer a better return to shareholders than expansion. Let’s think about this – they are admitting that the increase in turnover (and profit) achieved by taking more retail space in the next few years will not increase the value of shares as much as giving the money back to shareholders wishing to sell.

What is interesting and highly significant is that Next has publicly put a time horizon of at least three to five years for this period of lower retail growth – and is adjusting its business strategy on that basis. Given that they are probably one of the most professional and consistent performers over the last 2 decades and Lord Wolfson is a Tory peer and advisor to the Government the advice cannot be ignored.

So, what are your plans for the term of this Government?

Tony Heywood – Gilcrest Services Ltd
Retail Troubleshooter
Business Turnaround and Recovery
www.gilcrest.com
www.linkedin.com/in/tonyheywood2

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