What's "Next" As Its Shares Slide

Fashion Retailer, Next, revealed that it was getting ready to face a rough year ahead as Britons battling higher food, fuel and energy costs tighten their purse strings and try to control their spending habits. The company's shares slid by 6%, which translated into 140 million pounds being wiped out in its value.

Next's chief executive, Simon Wolfson, said that he expected a further drop of around 7% in its share value in the future months as Britain tries to come to grips with high inflation and falling property prices.

Mr. Wolfson emphasized that the current year could be quite tough for the whole clothing sector and due to spending pressures on the customers, and that there could not be any secret formula to escape that fact. So, even as Mr. Wolfson reiterated that he would not be lowering his products prices just to post decent sales figures, he would also try to bring about a balance in his costs and stocks and would start off with realistic targets.

He was confident that their robust business model would help them in facing any storms in the market. The downfall of its shares to 11.08 pounds, which was at a 4 year low, and was less than half of its value during the previous year has meant that its high ranking executives would most probably not be taking home their 13 million pound total bonus package.

Even though profit figures were higher at 498 million pounds on increased sales figures of 3.3 billion pounds and dividend increased to 55p, Mr. Wolfson's pessimistic views seem to be based on the recent turn of events affecting not only the US and the UK but also slowly spreading to the rest of the world. Its earning per share was also up by around 15% due to the fact that the company regularly bought back its shares and till now had purchased around 46% of its shares back from the market.

All this could change as market analysts predict that declining profits in the current year could hamper its buyback scheme and also choke the company's cash flow by around 50 million pounds. Mr. Wolfson was, however, confident on the company's new fashion launches including its signature range.

He also said that the company would continue to open new stores and had drawn up plans to open new stores in Scandinavia and around 10 stores in China. Mr. Wolfson stated that Next would not have made such high profits had it not added new stores in the previous year. Next is also planning an online venture by selling ready-made kitchens, bathrooms and bedrooms over the Internet after increasing its profits due to an increase in sales in its online Next Generation Home Shopping Business.

Next is also planning to market its storage and distribution expertise to other small dealers. But Mr. Wolfson's predictions of his company's shares touching 20 pounds seems to have been derailed by the current state of the economy and he said that he did not expect the enormous drop in the share prices of not only his company, but of the whole sector.

However, he reiterated that now was the right time to strengthen the base of the company and that the brand would emerge out of this year in a better position than when it had entered it. So, as Britons begin to tighten their belts and try to put a halt on their purchases, companies like Next will have to adapt accordingly and get through the current year by keeping a tight leash over costs and try to increase their market presence and market share.

Next seems to have identified the problems and charted out a solution but the shifting ground realities will decide whether Mr. Wolfsons predictions turn true by the next year.