On that note, no pressure, we're going to hand over to you for questions. We do have a mic if you need one, but you might not. On that high-pressure note, who's going to go first? Richard. Do you want a mic? Yeah, we'll make it at the front here, sorry. We'll have one person at the front, one at the back, and then we'll old style. Not like UBS, where you've all got your own mic, is it? We'll be back there next time, I think. Are we booked? Yeah, we've booked the room for next time.
Yeah, thank you. Richard Chamberlain, RBC. I just, can I just kick off with a question on the, I was intrigued by your comments on the overseas business, Simon, and obviously you've said that the more further afield territories haven't been doing so well. And I just wondered if you can talk a bit more about the extent to which you intend to sort of share the stock risk with partners and whether there's a sort of risk there that those partners aren't currently or may not now sort of buy more into the sort of fashion-forward ranges. Because I guess the risk is that they get very conservative without having to take all the stock risk. So I just wondered how you're sort of thinking about that, really.
Look, I mean, our view there is we've got to have the right partners. And, you know, again, we can't make them buy stock they don't want to. It is their risk. So the trick is to work with people who really understand their local markets. And it will be different from the things that we are most enthusiastic about. So we can't say, well, no, you've got to take this denim skirts or all the rage, because they may not be in wherever it is. So I don't think there is a way of managing that risk, other than making it very clear upfront, as we have done, that this is part of what we want to do. We want to build an exciting brand. I think also that the partners we're working with understand that.
They have got, if they want to sell plain chinos or, you know, V-neck jumpers, they can do that handover. They've already got those. They're really looking to our brand to add to their portfolio rather than replicate it.
Okay. And sorry, and just to clarify, did you say that the overseas business at the moment is disproportionately weighted to kidswear?
Yes.
But it's men's and women's that are actually out for sort of catching up. Is that correct?
They're growing the fastest.
Okay.
No way, it's still kids is still our biggest P&L overseas.
Got it. Okay, thanks.
Yeah, just in the middle there.
Hi, it's Georgina Johanan, and I'm from J.P. Morgan. Two questions, please, both on pricing. Just first of all, on the point around light-for-light prices being down 2% in the first half, I think you had initially said last year that your best outlook for pricing was flattish. So just to understand really what's driven the change in your decision there, please, especially given that you're only talking about 0.5% increase in the second half, and I know you've talked about not liking that volatility in prices. And then the second, I guess, just more broadly, like where you've seen a bit of consumers kind of appreciating quality more and maybe those higher price points, just really your view of why that's happening, please. Thank you very much.
Yeah, okay, so I think the answer to the light-for-light prices coming down, I think that is we have been more aggressive in terms of moving our sourcing. We've done, I think the key actually has been we've done much more travel. I think, you know, during the pandemic, we all convinced ourselves that we could work from home, select products online, and we've, but I think getting back out into factories and into new factories and giving our existing supply base a little bit more competition. Plus the fact that there are some territories where, you know, we are seeing significant local deflation, and that has been better, or, from depending on whose perspective you're looking at, that has been better or worse than we expected, but it hasn't been a, it's not something I can sum up in what the companies have done.
Our individual teams have traveled more and got better prices and been more aggressive about pushing product into new suppliers, and the second question was about, oh, the shift in consumer preferences. I don't know. You know, you get these sort of super cycles, and I feel if you look back over the last, you know, really from sort of 2015, 2014 onwards, you saw a diminishing interest in clothing in general, fast fashion, the rise of more interest in value, but basically fashion moving down the pecking order, suddenly people weren't watching, you know, America's Next Top Model or How to Look Good Naked or whatever it was. They were watching MasterChef and travel programs, so I think people's, you know, interest in clothing waxes and wanes, and we appear to be at a stage where their interest is returning.
Thank you. May I just quickly follow up on the first?
At the very end.
Okay, fair enough.
Yeah, just now. And then over here, Tom. Next.
Yeah, hi, Geoff Lowery at Redburn. Just one question. Can you help us understand your UK customer count online a little bit more? In particular, what you're seeing in terms of gross recruitment versus churn, and whether the profile that you gave us a few years ago of sort of year one customer does £100, year four customer does £300 or whatever the numbers were, does the funnel still look the same once you've recruited them?
Yeah, there's been no material change. I will check this actually, but there's been no material change in the performance of cash and credit customers in terms of their ongoing performance. Other than that, generally, their spend per customer has gone up. I think the big difference is the mix rather than the behavior. So we have been taking on more and more cash customers who are, where the attrition's higher and the average spend is lower. But those cash customers themselves, we're seeing no material change. Over here. Oh, we've got a fight? No.
Good morning, Warwick Okines from BNP Paribas Exane. Just wondering if you could give us a bit more detail perhaps on your Nordstrom trial, what's been working well, what's the scope of it, and how much opportunity is there for some of your Total Platform clients to piggyback on the success that you have internationally?
Look, I mean, I'm not going to discuss the Nordstrom trial because that is between us and them ultimately. It's a very small trial. I think, and all I can say is it's not proved unsuccessful. You know, it's proved as successful as we could have hoped for, I think. But it's a very small amount of stock, and it's very focused on kidswear. So it doesn't tell us anything about how our other brands or volume would perform, even on kids. We will be trying it more going forwards. The people that we are talking to about Next, we're also talking with them about product from our other wholly owned brands. There's definitely interest, but there's not enough orders for me to really give you any super encouragement on that.
I think it's going to take two or three years really for that overseas third-party business to form in terms of the shape of it, which products from Next work, which brands that we've got work. I think the one thing I can say is that Cath Kidston seems has instantly gained traction overseas in a way that many of our other brands haven't. I think that's probably the only piece of real information I can give you. I could make some other stuff up, but it wouldn't be worth it. Yeah, you're next.
Hey, it's Adam Cochrane from Deutsche Bank. I've got two questions, please. Firstly, on the profit from equity investments, can you just run through? I can understand you've got a very good forecasting process sitting within Next. With those companies, can you just run through how you come up with that number? Do you review the budgets very tightly, very prudently? What's the risk to that number, both upside and potentially downside? And then secondly, when you're looking at those aggregators and the growth, how do you make sure that the Next brand equity is being presented consistently and how you'd like it to be done across those different platforms?
Is there a risk that you get excessive discounting, for example, or the way that you wouldn't be perceived in the UK that maybe trading on Zalando or something else, they treat your brand differently to the way you do it yourself? Thanks.
Yeah, it's a good question. So I think the risk of that number, we've de-risked it. We might not have de-risked it enough, but we don't just take the number they give us and plop it in our results. We take the number they give us and take a little bit of the shine off it. And actually, so far, we haven't been, our estimates have been better than the partners' taken as a basket. So I think that's reasonable. It's a really interesting thing in that the way that companies that work in private equity work in terms of their budget is very different to the way Next works. So we will work by saying, well, what's the budget? You know, we're as sure as we can be that we're going to hit it. Private equity kind of works the other way around.
It's like, where could we get to? And then the owners, I think the impression I get is the owners will sit there going, surely you can do a bit more than this. You can put a bit more on that top line. As if somehow forcing the top line in a forecast up, it will actually make any difference to reality. And we have been very careful with the companies that we dealt with to make it clear that what we want from them is an accurate forecast of what they think will really happen rather than something to keep us happy or to keep a prospective buyer happy. You know, and I think the trick there is what we've done with their incentives is their incentives are on absolute profit growth over a long term.
So they will have a percentage. The management and all these businesses have a percentage of the business they own. They have an option to sell that to us on a multiple of profits in five years' time. So it really doesn't do them any good to be overoptimistic this year. And the other thing is their annual bonuses are set against the targets that we agree with them. So any optimism in their budgets will cost them. What was the second half of the question? Excessive discounting. Well, actually, interesting. When we bought these businesses, they've all gone, oh, well, obviously we have to stop discounting now. And they've all, you know, like a Ouija board, no one quite knows who's moving the cup. They've kind of just started doing things because they think that's what we want. Actually, we want them to maintain their own brand.
For some, you know, brands, actually regular promotions are part of what they do. We have to let them build up their own pricing and promotions strategy. As far as the customer's concerned, the customer doesn't know that Next owns Reiss or FatFace or Joules. As board members, we are keen for them to preserve and maintain and develop the value of the brand that we bought. We, as board members and shareholders, we'd be upset if we saw excessive discounting. We haven't tried to say, look, you've got to do it like Next does it, because that wouldn't be right.
I meant discounting of Next product on third-party aggregators.
Oh, I apologize. Yeah, I mean, obviously legally, we can't do that. I think if we felt the brand was being significantly devalued, we would come off the aggregator. We keep a very close eye on it. But most of the promotions that we see on our partner sites tend to be promotions about the order rather than the content of the order. So it's 10% off your first order rather than 10% off Next.
Hi there, it's William Woods from Bernstein. The first question is just on the different categories that are non-clothing. I think last year you showed some kind of weakness in, I think, home, beauty, and sportswear relative to clothing. How is that going and how do you think about that going forward? And then the second question is on the corporate blob. You were quite cautious about that last year. How do you think the progress internally has gone and culturally within the business? Thanks.
Yeah. So in terms of the culture, I think it's going really well. I mean, actually, I'm not the best person to ask because I would say that, wouldn't I? You know, I'm the last to find out if things aren't going right. So I think, you know, the best people to talk to are the people who are running those individual businesses. But I hope what they would say is, look, actually, having Next as a shareholder, having Next as a shareholder that understands retail but doesn't interfere too much is a good thing. That's our ambition. I have seen nothing that suggests that that is not the culture that people are adopting. Because I think ultimately, it's easy to get people to adopt a culture that they want in the first place. No one really wants to be told what to do.
You know, we can be demanding, we are demanding about some things, demanding about their financial reporting being right and being honest with us, all those sorts of good things. But in terms of the way they run the business, they've got to run it the way they see fit. In terms of home, beauty, sports versus clothing, the only thing I can say meaningful on that is that we have seen the home business now stabilize. So I think for the last 18 months, we've been seeing home moving backwards. And so if it's taken a long time to recover from the bubble, the COVID bubble, that does seem to be normalizing now. So I'm more hopeful on home looking forward.
I think the other thing about home, just while we're onto it. I think it's an area where partly because they have, it's been such a tough time for them, they have been much more adventurous about the breadth of offer that they're offering customers. I think if you go and have a look, browse through some of the products that we're selling, I think you might be pleasantly surprised, maybe not. Okay. Yeah.
Thank you. Mornong Simon , I'm Carly from UBS. Just to follow up on what Georgina's question was around pricing, please. You say in the release the like-for-like pricing is only referring to about 30% of sales. And you've referred to strengthening mid and upper-end price points. I know you don't necessarily talk about ASPs, but just curious how that evolves this year, next year, that one.
Yeah, no, good. I'll just answer it and then let you ask yourself the question. The ASP on the board ASP going forward, do you have that?
The initial amount, GBP 25 something like that?
No, no, the growth.
The growth, yeah.
Growth, 3% or 4%?
Yeah.
Something like that. So if we're looking at mix and that includes mix between men's and women's and all, the effect of mix on price is to take the minus 2% and push it to plus 3%, plus 4%. And so that is really evidence of that shift in consumer preference.
But that's everything. That's sales mix, everything.
Everything.
Yeah.
Cool. And then maybe a slightly longer-term picture, picking up on your point about the watershed moment, which you've referred to more than once.
Sorry about that.
Yeah, yeah, an interesting one. But look, I think you've also talked about executing the plan. That's what kind of determines the success and things like that. But if you assume strong execution on a three to five-year view, should we be expecting a material kind of step change in the earnings trajectory relative to what you've talked about last six, seven years, acceptably good performance kind of thing? How should we think about it?
Look, I'm not going to tell you how to think. It's a really big mistake, but I think there are two serious points. I think the first is I'll be very disappointed if our compound annual growth over the next seven years, assuming that there are no sort of train crashes or anything, but I'll be very disappointed if it wasn't higher than the 2.2% underlying profit growth we've experienced over the last seven years. That would be, I'd be disappointed by that. In terms of aspirations for growth, I'm acutely aware that there are businesses that give long-term projections. You will have seen from our own ability to project even one year ahead that we often get it wrong, and I think it's very dangerous for us to make grand aspirations for the group as to what top line can be.
I think it's very important that that is done by our investors and they're much cleverer at it than we are. But I think for us to do it is a mistake because if I set a growth target or a number of TP clients, I'll definitely deliver it. You know, if I set a target for overseas growth, no question we'll deliver it. We might not deliver it profitably, but we can definitely deliver top line growth. TP deals can definitely do that. And there might even be profitable TP deals, but the risk inherent in those deals might be much bigger than is immediately apparent. So the very active setting public-facing long-term targets could actually undermine the effectiveness of the business. What I can assure you is that each one of these opportunities, we will be growing as fast as we profitably can.
But we're not going to say. I'm not going to give you a sense of where that might be in five years' time. A, because we don't know. B, because the act of predicting it would potentially damage the business. And on that, oh, one more.
It's Anubhav Ma lhotra from Liberum. I just wanted to ask on the outlook for the store portfolio. Now, last five years, you're probably close to 80 mainline stores. And most of the biggest reason given for that has been that you have not been able to achieve appropriate profitability under any conditions for those. And you have renegotiated a lot of those leases. Probably costs are coming down. Do you think you're through the worst of that? You're through the closure parts and now looking to develop portfolio, store portfolio going forward? That's one. And then second, on the credit business, I know you mentioned you don't plan to increase or let it decline in major proportions. But what do you think about taking the credit business to the Total Platform brands?
Yeah, very good question. So in terms of total platform, I think our clients, our biggest client, Reiss, is reluctant for us to put Next Credit on their website. They think that. So we are developing and trialing a white label credit that will be like Fashion Pay. Whether that works or not, we don't know. But we will be trialing that. But it is a trial. Don't get excited about it. Then in terms of retail stores, there are some areas where we're actively looking at new sites. There are some stores that we think we're unlikely to reach agreement with landlords on rent. If I look at the sum total of what we expect in the year ahead in terms of opening and closures, in square footage terms, we're expecting no change, and on that informative but more prosaic note, I think we'll finish.
Thank you very much, everyone.