Next bets on the department store of the future

Trials for hybrid shops, selling just cosmetics and homeware, were first unveiled in July 2020. The Beauty & Home stores sell more than 250 products previously only available from Next online.

By adding clothes and other well-known brands, Next is effectively vying for rival Debenhams’s former footfall following its demise which left 160 units vacant. Only about 14 of the 48 stores meant to be re-let or repurposed are currently operating. Its biggest new occupier is Next, which has opened four of its beauty and home stores in former Debenhams sites.

“I think it’s to gain market share, I don’t think it’s to gain a physical footprint,” the adviser says. “Beauty in particular, that is an area where physical presence is still very important.”

The focus is on the type of store, rather than the volume. Next has reduced its footprint from 538 stores to 491 over the last five years. And the scope for expansion is limited, the adviser adds: “They shouldn’t get carried away with the amount of space that they take out because a large proportion of their sales will remain online.”

This caution is backed by Next’s own investment plans. In its most recent annual report, the chain allocated £48m for store expansion between 2023 and 2025, compared with £230m for its warehouse operations, which it now allows other retailers to access for a fee.

Online sales still account for its largest chunk, bringing in £1.2bn compared to £540m from shops in the six months to July. 

In an update to the City on March 24, Next expects to make a pre-tax profit of £822m for the year to January following a rebound in sales.

Department stores have taken a big hit in recent years. But it seems if anyone has a shot at giving them a new lease of life, it’s Next.

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