Next’s strong business model and performance continue to impress
Matthew Partridge Shares editor
Selling clothes is difficult at the best of times. You have to stay on top of trends while dealing with the uncertainties created by the wider economy. In the last few weeks alone both Ted Baker and Superdry have crashed, with the former going into administration and Superdry embarking on a very painful restructuring. Nevertheless, such turbulence creates opportunities for companies that can create sustained and profitable growth.
One business that has managed to prosper while others are struggling is Next (LSE: NXT). Next has done well because it has made some shrewd decisions. Seven years ago, in 2017, it realised that its old model of simply opening more stores, alongside a successful website, wouldn’t continue to work.
Instead, it decided that since the future of clothes shopping was moving online, it needed to focus on upgrading its website and running a smaller, but better range of stores. It also started to invest in its IT and warehouse systems, with the aim of cutting costs, becoming more efficient, and selling logistics services to third parties.
IT provides an edge
This change hasn’t been a complete success, as its growth has slowed a little. Still, the strategy has enabled it to continue making money and avoid the predicament of many other firms that have found themselves lumbered with long leases on unprofitable stores.
Most importantly, the edge in IT and logistics created by Next’s infrastructure investments gives it an advantage when it comes to picking up the pieces from the current high-street carnage. It has recently started snapping up
