March 20 (Bloomberg) -- Next Plc, the U.K.’s second-largest clothing retailer, reported a 12 percent increase in full-year earnings, making more money than Marks & Spencer Group Plc for the first time in the brand’s 32-year history.
Underlying pretax profit rose to 695.2 million pounds ($1.1 billion) in the 12 months through January, the Leicester, England-based retailer said in a statement today. That exceeded the 665.2 million pounds earned by Marks & Spencer on that basis in its last financial year ended March 2013.
With a greater market value than its biggest competitor, Next now trails M&S only in terms of absolute sales, helped by a business model that’s adapted more quickly to the shift in consumer habits toward online shopping. While Next Directory has grown to become the U.K.’s biggest home-shopping business, M&S is still working to address past underinvestment.
“Next is just fabulously successful, it’s absolutely at the top of its game at the moment,” said Richard Perks, an analyst at researcher Mintel in London. “In many respects, it’s the most successful multi-channel retailer.”
Next rose 1.5 percent to 6,680 pence at 9:50 a.m. in London, valuing the company at 10.4 billion pounds. The stock has gained 61 percent in the past year, outpacing a 21 percent gain for M&S, which has a market value of 7.8 billion pounds.
Next’s pretax profit beat the 694 million-pound average of 19 analyst estimates compiled by Bloomberg. The retailer raised its earnings forecast in January, predicting an outcome of 684 million pounds to 700 million pounds.
The gain in holiday sales that led to the revised forecast drew praise from M&S Chief Executive Officer Marc Bolland, who said in January that Next did “a better job” over Christmas.
Bolland is now counting on a fashion collection for men and women and a new online platform to bring customers back to M&S, which has been a fixture on Britain’s shopping streets for almost a century longer than Next.
“Unless M&S really can turn its business around then Next will overtake it and become market leader on current trends,” Mintel’s Perks said. While M&S is trying to do the right things, “the implementation so far has not been good.”
Next said today that it anticipates pretax profit of 730 million pounds to 770 million pounds for the year ending January 2015. Analysts predict that M&S will make 719 million pounds on that basis in the year through March 2015, according to the average of 22 estimates compiled by Bloomberg.
Next also increased its sales forecast for the coming financial year. Revenue under the Next brand will rise 4 percent to 8 percent, according to the company, which in January had forecast growth of 3 percent to 7 percent.
Sales last year rose 5.4 percent to 3.74 billion pounds. M&S had revenue of about 10 billion pounds in its last financial year, almost half of which came from food.
With more than 500 outlets across the U.K. and Ireland, Next is investing in new stores, which it says provides a boost to online sales.
Total sales under the Next brand rose 5.5 percent during the year. Sales at the retailer’s stores gained 1.7 percent, while revenue at Next Directory increased 12 percent.
Next raised the dividend 23 percent to 129 pence a share.
“Nothwithstanding the continued pressure on the U.K. consumer, we anticipate another year of growth for Next,” Chairman John Barton said in the statement.
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