BUSINESS MODEL - Next/media/Files/N/Next-PLC... · Finance • Managing financial resources...

BUSINESS MODEL

1 Great productsNEXT products are developed by our in-house designteam tooffergreat style,qualityandvalue formoneywithacontemporaryfashionedge.

NEXTalsosellsaround500third-partybrandsthroughLABEL online.

A combination of NEXT and other branded productprovides customers with extensive product ranges, all as part of a convenient shopping experience.

2 Global sourcingNEXT sources over 200 million of its own branded productsgloballyfromover40countries.

NEXT sourcing provides around 40% of NEXT branded products from our global supplier base including 4 NEXT ownedfactorysites.

3 Efficient supply chain

Next-daydeliveryisstandardforUKNEXTOnlineordersplaced before midnight.

4 Outstanding customer experienceOutstanding customer experience is a key focus,regardless of whether our customers are using our online websites,mobileappsorvisitingourstores.

Customers can choose delivery services to suit them,orderingonlineorinstorefordeliverytohomeorstore.Duringtheyearwelauncheda‘CollectToday’serviceoncertain items ordered online for same day collection instore.

NEXToffersacreditfacilityforUKNEXTOnlinecustomerscalled nextpay.

Our largenumberofstores,manywithcafeandotherconcessions, provide a convenient and excitingshopping experience.

5 Returning value to shareholdersNEXTishighlycashgenerative,allowingustoinvestinthebusiness and deliver long term value to our shareholders throughacombinationofgrowthinEarningsPerShareorpaymentofcashdividends.

What we do

OurapproachistobuildasmuchflexibilityintoouroperationsandcostbaseaspossibleinordertominimisethenegativeeffectsoffallingRetailsalesandmaximiseopportunitiesforgrowthOnline.Thismeansaconstantprocessofreinventionandexperimentationwithinourbusiness,whilstpreservingtheintegrityofourbrand,thecalibreofourpeople,thequalityofouroperationsandtheprofitabilityoftheGroup.

NEXT offers exciting, beautifully designed, excellent quality clothing and homeware which meets and exceeds the aspirations of our customers, at prices that are within the reach of most people.

TheGroupisprimarilycomprisedof:

• NEXTRetail,achainofaround510storesintheUKandEire.Themajorityofourstoressellclothing,footwear,accessoriesand/orhomeproducts;andweoperate37largecombinedfashionandhomestores.NEXTstoresareanimportantpartofourOnlinedeliveryservice.

• NEXTFinancecurrentlyprovides£1.2bnofconsumercreditforNEXTcustomerstopurchaseproductsonlineandinourstoresthrough

• Lipsy,whichdesignsandsellsitsownbrandedandotherbrandedproducts.IttradesthroughNEXTOnline,fromaround50NEXTstores,

• NEXTSourcing,whichdesignsandsourcesNEXTbrandedproducts.NEXTSourcing(NS)isourHongKongbasedinternationalsourcing

Intermsofthebreadthofourproductoffer,thestorygoesbeyondsimplyextendingNEXTbrandedproductranges.Overthelasttenyears,wehavegraduallytransformedourwebsitefromasinglebrandsitetoanonlineaggregatorofclothing,footwearandhomebrands.Thisyearwehavesoldover£400mofotherbrands’productthroughLABEL,abusinessthatcontinuestogrowanddevelop.

The NEXT Brand also continues to develop overseas through its presence online. Sales of NEXT brandedproductcontinuetogrowstrongly,boththroughourowninternationalwebsitesandlocalthird-partyaggregators.ThisyearourOnlineOverseassalesreachedover£350m.

NEXTOnline 48%NEXT Retail 29%NEXT Finance 16%NEXT International Retail 1%NEXT Sourcing 4%Other 2%

2018/19 profit by segment

Great products12

3

4

5

Global sourcing

Efficient supply chain

Outstanding customer

experience

Returning value to

shareholders

Currently nearly half of our UK Online orders (by number of orders) are fulfilled through our shops.

nextpay and next3step.

• NEXT International Retail, with around 200 mainly franchised stores in 35 countries.

and through wholesale and overseas franchise channels.

agent, competing for business with other suppliers.

Why we are uniqueThe scale of our Online business and our store network in the UK has allowed NEXT to develop anincreasingly powerful platform for selling clothing and homeware in the UK and Eire.

• NEXT Online, with over 5 million active customers globally and websites serving over 70 countries.

NEXT operates 8 UK warehouses, 7 UK depots and 3internationalhubsprovidingcosteffectiveandefficientdeliverytoourOnlineandRetailcustomers.

Our key resources and relationships

Wedependonthefollowingresourcesandrelationshipstocreatevalueandachieveourbusinessobjectives:

Key resources and relationships How we create valueCustomers • Providingourcustomerswithgreatproductrangestheywanttobuy

• Offeringexcellentcustomerexperience,regardlessofwhethercustomersshoponline or instore

• Customersareattheheartofeverythingwedo

Suppliers • Sourcinggloballytodeliverqualityandvalueformoneyproductsthatareresponsiblysourced

• Workingwiththird-partybrandedsupplierstoprovideanextensiverangeofclothing and homeware products to our customers

Workforce • Attracting,retaininganddevelopingthebesttalentateverylevelthroughout NEXT

• Creating an environment where all individuals feel welcomed, respected and supported

Buildings and Infrastructure

• Providingrobust,customerfriendlywebsiteswhicharecontinuallyreviewedanddevelopedtoensuretheyaremeetingourcustomers’needs

• Building and operating warehouse and logistics operations that provide an efficient and agile product distribution network

• Operatingapredominantlyleasedstoreportfoliowhichisactivelymanaged.Opening,closureandrefitdecisionsarebasedonstoreprofitabilityandpaybackcriteria

Finance • Managingfinancialresourceseffectively,includingastrongfocusoncostcontroland maximising shareholder returns

Business strategies and objectivesTheprimaryfinancialobjectiveoftheGroupistodeliverlongterm,sustainablereturnstoshareholdersthroughacombinationofgrowthinEarningsPerShare(EPS)andpaymentofcashdividends.Overthelasttenyears,EPSandordinarydividendspersharehavebothincreasedbyover170%andtheCompany’ssharepricehasincreasedbyover330%.Thislongtermvaluehasbeencreatedthroughthepursuitofthefollowingstrategies:

• Improvinganddevelopingourproductranges,successinwhichismeasuredbysalesperformance.

• FocusingoncustomerexperienceandsatisfactionlevelsinbothRetailstoresandOnline.

• Increasing the number of profitableNEXTOnline credit and cash customers and their spend, both in theUK and internationally,complementedbyourLABELofferingofbrandedproductsandthecreditfacility(nextpay)weoffertoourUKNEXTOnlinecustomers.

• Maximisingtheprofitabilityofretailsellingspace.Newstoreappraisalsmustmeetdemandingfinancialcriteriabeforetheinvestmentismade,andsuccessismeasuredbyachievedprofitcontributionandreturnoncapitalagainstappraisedtargets.

• Managing gross and net margins through efficient product sourcing, stock management and cost control.

• Maintaining the Group’s financial strength through an efficient balance sheet and secure financing structure.

• Generatingandreturningsurpluscashtoshareholdersbywayofsharebuybacksand/orspecialdividends.

Strategic ReportGovernance

Financial Statements

Shareholder Information