NEXT plc

good morning and welcome to the next plc half year presentation it is great to see all portions of our business moving forward in a positive way geographically the business in the uk both retail and online and our international business are all moving forward in a meaningful way here if you look at the data and from another viewpoint looking at our brands, our next brand, wholly owned brands, and third party brands are also very positive. While we're very pleased about our broad based growth, we maintain a balanced and cautious outlook for the future. Principally due to the external situation, both here in the UK, and around the world. in spite of what the external world may hold for us we believe that our strong management team balance sheet and financial position leave us very well positioned to withstand any external events before i turn over to simon i would like to publicly recognize the retirement of a very important long-serving and experienced executive her name is shona anderson And her final position at Next was both corporate secretary and corporate controller. Shona always seemed to wear at least two hats at Next. She was a great asset to the board and a great asset to the company. And I think she really embodied the culture of Next, very hardworking, very smart, willing to take the lead when necessary, but also worked very well in a team. to really meet our objectives. So Shona, many thanks, and I'm sure any board where you're an NED in the future will be very glad to have you. Simon?

Thank you very much, Shona. I didn't realise I was doubling up as a recruitment consultant as well. Excellent. Yes, thank you, Shona. So standing back from the numbers, really good first half, and I think the important thing to stress about these numbers is that there are there's news that is genuinely very good news and there's news that's not quite as good as it looks and the news that's very good news is the overseas sales there are it doesn't appear to us that there are any external tailwinds that are helping that business but in the uk we think the first half was definitely boosted mainly by the weather um this year was a particularly good summer last year was particularly poor and competitive disruption definitely helped us towards the back end of that half which is why we're not as optimistic for the second half as we have been or as our performance in the first half would indicate so moving on to those numbers total sales up 10.3% full price sales up just under 11% breaking that down in terms of uk uk up 7.6 percent online still ahead of retail but perhaps the most exciting or most surprising number here is the uk retail number and that is driven one percent of that comes from new space but the underlying strength we think is is down to the weather where weather seems to have a disproportionate effect on retail when particularly you get sudden changes people want the products immediately and overseas up 28 percent which was an unexpected but very good performance profit before tax up just under 14% tax rate pretty much in line with last year and as we expect it to be for the full year and then in terms of earnings per share earnings per share up 16.8% boosted by the share buybacks mainly by the share buybacks we did last at the end of last year in terms of the dividend 16 increase in the interim dividend we expect the full year dividend to be broadly to increase broadly in line with whatever we deliver in terms of eps in terms of the total dividend for the year in terms of cash flow and just to remind you all we talk about profit and loss and sales and when we talk about that for the group we we consult we report the percentage of the um businesses that we own so of the subsidiaries that we only report we own 70 of business will report 70 of their sales 70 of their profit in their cash flow and balance sheet um for reasons i don't quite understand it's impossible to get disaggregated according to our finance department so we'll show this on a fully consolidated basis and cash flow from profit 62 million in terms of capital expenditure up marginally on last year and a half just to reiterate where we are on capex 179 million which is pretty much what we expect expected to spend at the beginning of the year in terms of where the growth is coming from it's all coming from the increase in additional space it's not maintenance capex maintenance capex in the stores ran at 17 will run at about 17 million this year compared to 20 million last year and that's the sort of number that we would expect in terms of maintenance capex for the foreseeable future for the next few years in terms of the space expansion we mentioned at the beginning of the year Thurrock is a bit of a one-off it was it's the sort of first of a kind so we spent more on it than we would spend normally it's 19 million of that 54 million, and the only news here really is that having opened it, it's hitting its targets. But I wouldn't want you to look at the payback on this store and think that's what next targets are going forward. It is very much a one-off. In terms of the stores that we opened that weren't Zurich, they missed their target so far. They've missed their target by around 6%, 18% net branch contributions. they've beaten the internal hurdle that we set of 15% profitability but they missed the payback of 24 months and we expect them to miss the payback of 24 months and I think there is an important point to make here and that is that it's going to be much harder to open retail space in today's environment than it was 10 years ago and it's just worth spending a little bit of time explaining that if you look at what our stores were taking on average per square foot 10 years ago being around 300 pounds a square foot today on a like-for-like basis a store that was taking 300 pounds a square foot 10 years ago today would be taking about 30 percent less now as it transpires that's not as big a problem as it sounds because rents have come down on a like-for-like basis by pretty much the same amount so we've still got a profitable store portfolio the issue is the cash generated per square foot versus the cost of fitting it out so at let's say 25% cash contribution adding back depreciation of around 25% we were generating £75 a square foot but today that would generate £53 a square foot so if you look at the payback very simple basis is deteriorated not just because the cash per square foot has gone down but because the cost per square foot of fitting out shops has gone up significantly 32% in that interim period so what would have been a 22 month payback is today 42 month payback on a like-for-like basis now obviously actually our average pounds per square foot in the portfolio hasn't dropped by nearly as much as the like-for-likes and that's because generally we've opened smaller shops losing a little bit of potential in locations, but in order to boost the £2 effort to attempt to pay for the shop foot. Nonetheless, we haven't hit the 24-month payback. The question that we are asking ourselves that we haven't completely answered yet is looking at the portfolio that we've opened, 18% net branch contribution, 38% internal rate of return, um payback and that's based on the assumption that the stores declined by two percent like for like each year after opening um the question is would we today close those stores because they were performing like that and the answer is no and so what we need to do if if we are to continue to open space and there is a big if there we're going to have to look at we won't be able to do it at 24 months payback i don't think And I think the answer is to come up with different hurdles and to raise the hurdle, to reduce the risk of the shops by raising the profitability hurdle, entering where we can into turnover rent arrangements or total occupancy cost arrangements to de-risk shops. And I think in those circumstances, and only in those circumstances, we can afford to take a slightly longer payback. We're going to be thinking about, we haven't come to a sort of definitive set of hurdles, but I wanted to give you a sense as we move the goalposts, the direction in which we're moving the goalposts, if and when it happens. I think one of the important things that will feed into our consideration is what happens to wage costs and the outlook for our employment equal pay. Because if we think wages are going to continue to go up dramatically as a result of sales, then that will affect this decision also. And so that's new stores. In terms of working capital, 18 million less. This is mainly about the timing of payments for staff incentives. Actually, it's all about the payment we made last year in respect of the previous year's performance, which was a very good performance. In terms of repay the staff bonus or the employee bonus. in the financial year after it's been earned which is why you should get this tail out of that given this cash boost stocks up 35 million and we'll be talking more about that later so total surplus cash up 87 million on last year buybacks up 43 million this isn't because we've consciously slowed down our buyback program it's because for a lot of the last six months we've been locked out of the market got annoyed with them when i said locked out of the market in the rehearsal because it made it sound like somehow we weren't allowed to trade we were but we were above our internal um hurdle for price um it looks like you've very helpfully helped us with that today but um our intention will be to carry on buying back shares as and when we can um net cash flow up 141 million um moving on to the balance sheet investments appears to have come down by 17 million this is all about the amortization of brands on the balance sheet stock I need to talk a little bit about stock because our stock has gone up more than you would expect and in fact more than we expected and I need to explain that and actually in the next brand it's gone up by 16 percent just to explain that two years ago we were on around 20 weeks cover of stock that's the stock in the business and the stock on the water last year we increased our cover to account for the additional time the stock was going to be on the water which is about two and a bit weeks and because we were experiencing disruption in Bangladesh so we moved to 23 weeks we thought that was it this year we're on 26 weeks and the reason for that is because last year a huge amount of our stock still turned up late mainly as a result of factory disruption but also disruption in the world's um logistics uh the freight markets um and so this year um teams built embraced the decisions by and they ordered early and i would stress this is ordering early rather than ordering more stock um but we clearly overdid it in addition not only that but because capacity has come out of the global supply network it feels like that to us factories have actually been delivering early they've got a window of two weeks they can deliver early and actually freight times have taken slightly less than we have put into our um calculations so both of those good news in a way but it means we've got much more stock in the business in terms of end of season sale and the total amount of stock we bought we're not anticipating that our stock before the end of season will be any higher than the forecast we've got for um second half growth so we think end of season stock combined with any mid-season stock the total stock for mark down here we think will still be at or just below four percent i think it is also worth mentioning there is a slight upside risk here on on on the sales numbers by having so much stock this time last year as we ran into christmas those delays were definitely impacting some of the sales on some of the products that we were selling so there's a potential outside from having all that stock in the business in terms of customer receivables customer receivables this email our customers owe us on their mail order accounts so i'm going back in time there on their online accounts um actually credit sales to customers up 5.2 percent but we're continuing to see um customers paying down their balances slightly faster we think that's a very encouraging sign that means consumers our consumers at any rate are not feeling squeezed in terms of default rates they are the lowest levels that we've ever seen them at 2.3 percent and we're still conservatively covered in terms of provisions at 7.6 although we've released 10 million of provisions this year, and we did the same thing last year in the first half. We are still, I would argue, adequately, but not over-provided, for Baghdad. I said the over-provided stuff just for the benefit of our auditors that are in the room, and we have regular, interesting conversations about it. Other debtors, 56 million, that's two things going on. First of all, the growth in our aggregation business, aggregation business is largely on commission which means that the aggregator people like Zalando about you take the sales and a month later give us those sales less their commission so there's a month lag and that increases cash out by 20 million and about a year ago or just under a year ago we stopped doing the interest-free credit in our stores on furniture with Barclays and took it in-house and financed ourselves and that's what's sucking out that other 19 million

of cash.

Credits is up 152 million. Big number here is stock as I've explained. We've ordered more stock so we owe more to our suppliers. The other two issues are payroll accruals and taxes and both of those are fascinating subjects on which I could spend a lot of time speaking about. I don't want to deprive Jonathan of any of the interesting questions you may give him afterwards so please do speak to Jonathan about those in detail afterwards. they're basically technical dividends up nine percent in line with last year's earnings per share buybacks down 100 buyback commitments this is not buybacks this is a this is the last year we put in place a six month buyback program we haven't put in that program this year partly because our share price was above our target we will continue to do closed period buybacks but you shouldn't necessarily expect us to do a long six month program of committed buybacks going forward so net debt down 180 net assets up 340 very strong balance sheet and very strongly financed this was the our cash and facilities at the beginning of the year our financing at the beginning of the year 1.2 billion we repaid the 2025 250 million pound bond we also bought back 136 million pounds worth of the 250 2026 bond that was funded by the issue of 300 million pound bond you'll remember that we have been keeping our powder dry for a number of years now accumulating cash in case we weren't able to go into the market or we thought the market wasn't a price that we had to pay the market actually was fine so we've refinanced those bonds through the market and we pushed our rcf up by 100 million pounds so still very comfortably financed as a business in terms of cash flow in the year and debt um we start at 660 generating around 870 million of cash 179 million of capex 280 odd million of ordinary dividends and were we to land at exactly the same number at the end of the year we'd be at 400 we'd return around 400 million of cash to shareholders we think that 660 is beginning to look a little bit low we've always said that the company should maintain or intends to maintain investment grade and we're way off the leverage that will put us close to the edges of investment grade the company's been at more than 1.2 leverage we started the year at 0.63 we think it will be wrong for us to continue to lower the leverage so maintaining leverage at 0.63 means that year-end debt we're now forecasting to be about 720 million with 470 million of cash and to be returned to shareholders or invested in the meantime we've only spent 119 million on buyback so far that leaves 350 million odd to either buy back spend on buybacks or special dividends or investments although i should say whilst we are talking to a number of potential investments at the moment there are none of any significant size that will put a dent in that in that number so basically most of it will either be shared by banks or special dividends moving on to retail retail sales up 3.7 percent full price sales up 5.4 percent the big drop in markdown sales in store is all about the fact that we kept far more of our stock online and the online warehouses for the online sales particularly overseas than we put into retail we thought we'd get a better return there and it was one of the big advantages of having so much more capacity that we were able to retain more sales stock for the online sale so underlying our full price sales after deducting is based around 4.2 percent um profit installs down 1.4 percent margins off by half a percent um obviously in my normal way i'll be going through in painful detail all the margin movements but spoiler this is all about national insurance basically the entire all the erosion of margin is about national insurance um at niv and minimum wage is pushing up the cost of labour in stores autumn margin nudged up a little bit with underlying margin up 0.2 remember this is where we said we would put our prices up a little bit to help pay for the cost of NIC markdown clearance rates even though we had less stock in the stores our clearance rates were a little lower payroll was a big cost and here actually without the productivity improvements we were able to make that number would have been 0.7 store occupancy costs positive movement here increase in light for light sales pushing wage costs down as a percentage of sales new space particular stores actually opened in the second half of last year pushing up costs to space by a point the same offsetting that lower energy costs and no business rates refund this year whereas we did have one last year central costs not a lot of movement here a little bit more technology cost and Retails share of the marketing campaign that we did into March April the newspaper campaign we did them So total movement minus 0.5 in retail looking to the full year Assuming that our like-for-like sales are down 2% in the second half We'd expect total sales to be down 0.6 what that means is that we would expect margins for the full year of to be at 9.8, down 1.2 on the previous year, of which 1.1 comes from NIC and wages. And if you're wondering why the erosion is greater in the second half than the first half from the NIC and wage spill, it's because it didn't come until April. Moving on to online. just to remind you that online business now we split in terms of our analysis we split between UK and overseas because the economics are quite different in the two businesses so starting with our online business in the UK total sales up 11% that was boosted by the additional stock that we had for sale that we kept back for sale so underlying full price sales up 9.2% in terms of where that's come from. The business now is just under half the businesses non-Next brands and in terms of where we're getting the growth, Next brands still growing online in the UK but you can see third-party brands and wholly owned brands and licenses delivering around 13-14% growth between them. that's important and one thing I should say is that wholly owned brands and licenses are a bit of a mouthful so I will use the unfortunate acronym wobble as we go through here but you can smile at that now please don't smile at it as I'm going through because it's just embarrassing profit really good number on profit in the UK up 17.7 percent margins are improved next brand These numbers, I'm showing you these numbers, but they're not quite right because we've reallocated cost between our non-Next branded business and Next. Over the past two or three years, we hadn't added some of the technology and marketing costs. We'd attributed them all to the Next brand. But actually, when you look at the marketing, although most of it is focused on the Next brand, the reality is it does benefit the non-Next business too. So we were under-allocating marketing and tech costs to the non-next-branded business. If we just sort of walk both of those numbers forward, and I've swapped the columns and rows here, so just the starting point is at the top, and that is without the adjustment in central overheads. If I count for the adjustment in central overheads, the underlying um next brand profit would have been at 20 um brands at 12.2 and what you can see if the next brand has moved forward a smidge and the um non-next branded business has moved forward by around just under two percent that's all about the item level profitability work we did to make sure that we weren't selling unprofitable third-party brands on the website and that really came down to mainly commission brands that were putting low value high returning items onto our website and those items because they're low value and were going out and coming back in large volumes were eating a whole of their profit to operations costs so we've weeded out those products in one of two ways we've said to the brands either either you can keep the items on the website but you have to pay a higher commission for them or you can take them off and they've done a combination of both so in terms of the walk forward on margin what you can see is bought in gross margin on brands up 0.7% that's all about higher commission rates on those unprofitable lines markdown broadly in line with last year and actually a good number considering how much more stock we had on the website how much more markdown stock we had on the website and warehouse and distribution big gain on the branded non-next branded side of the business and that was all about taking out these low value high volume lines if full price sales in the uk online are up 3.6 percent in the second half then we expect margins to move forward for the full year around 0.8 with the total margins around 21.5 in the uk for the full year online moving on to our international business online total sales up 33 We were able to put an awful lot more markdown stock onto our international websites. So the underlying full price sales are up only 28%. In terms of where the business is at the moment, around a third of it is coming on third-party aggregators, like Cicillando, About You, 70% from the next direct websites. In terms of growth, 26% on the next direct websites. we think of that 26% we think around 2 thirds of it 17% is driven by marketing and 9% natural word of mouth etc on third party the 33% is better than the underlying trend we think new aggregators added 9% of the growth and existing aggregators grew broadly in line with our own website at around 24% in terms of the shape of the business globally still dominated by Europe and the Middle East in terms of growth rates Europe grew the strongest I think the most encouraging number actually on this page and in fact in this section is the growth that we're getting in the rest of the world where in many territories where we had no traction at all we have begun to get good growth and I'm going to talk a little bit more about that in the focus section at the end terms of profits, profit up 36%, margins moved forward by 0.4. There is a slight wrinkle here in that last year we understated profits by around 0.7% in the first half. That reversed out in the second half. This was all about over-providing for duty in one of the territories where duty rules changed and we We were overly conservative in that. So actual like-for-like restated margin is broadly flat at around 15%. 40 gross margin up 0.4. Underlying margin on next goods up 0.2. And lower duty goods, lower duty costs contributing 0.2 to margin. That's not because duties have come down. It's because we've become more effective at working out exactly what duty we should be paying and reducing admin costs. in terms of markdown this isn't really an erosion of profit this is because we've got so much more so many more markdown sales on the website because we put more stock on so it's more about pushing the top line up from the 28 to 33 and it is about pulling the profitability of the full price sales down warehouse and distribution inflationary cost in wages broadly offset by operating efficiency, leverage over fixed overheads and an increase in handling charge. This is where the customer is paying for the delivery of goods. Marketing is the big increase in cost as you'd expect. So you can see that more than all of the margin erosion overseas was driven by increasing marketing costs which we see as a strong positive and again I'll talk about that in a little bit more detail later. In terms of second half, we forecast for the second half to be up 19%. You might look at that and go that looks overly conservative, given that we grew by 28% in the first half. In the first half we grew our marketing by 57%. At the moment we don't think we have the opportunity to increase marketing by much more than 25% in the second half. That is why we are being cautious about that number. It's still a big number but relatively cautious. we will see how it goes. If we are able to achieve better returns on our marketing, I wouldn't want you to think that that budget is fixed. Every few weeks we review the performance of our marketing. If we do better than expected, get better returns, then we will increase that number. So margin forecast for the full year we're expecting to be up around 1% on the basis of those assumptions, just under 15% margins. Moving on to customers, grew customers across the board. UK credit up 4%, just under the 5% increase in credit sales. UK cash customers up 12%. We think this number was almost certainly temporarily boosted by the disruption to another retailer during the year, so I wouldn't expect that number to continue for the full year. international customers are broadly in line with sales and slightly more as you'd expect because the new customers likely to spend less than the existing customers in terms of sales per customer and move forward in the uk we think driven by the increased product offer we've got on our website and overseas a reduction but potentially by less than you'd expect given the increase in new customers that we've got on the international business and just to remind you that these numbers exclude aggregators because we don't know how many customers are shopping with us on aggregators now the sharp amongst you which I'm sure is all of you will instantly be saying hold on a second that 10.3 million was significantly less than the 13.7 million he quoted at the year end and you know what's how have they managed to lose all the customers Just to remind you, we switched at the end of last year just talking about unique customers that order in the year rather than access because it was the only way of getting meaningful sales per customer numbers. The 10.3 million is the number that's ordered in the half year, not the full year. So we would expect the full year number to be more than 13.7 million unique customers in the year. moving on to four year guidance four year guidance for expecting sales to be up seven and a half percent that looks conservative looks like a six point swing in the second half if you just compare it to the first half if you compare it to two years ago it looks a little bit more realistic at 3.7 percent and remember that this year we had an exceptional summer competitive disruption in the first half which boosted numbers and we think the uk economy will get tougher as we move through the second half what we're particularly concerned about is employment if this is the setting you can see vacancies have continued to drop since 2022 and that there we can see no change in that trend and that is beginning to be affected to affect payroll employee numbers hasn't yet affected unemployment numbers our view is that it will and what's interesting is that those numbers are reflected in our own numbers which are much more dramatic so if we look at the number of vacancies that we have in next relative to two years ago we've got 35 percent less vacancies that's not because we are dramatically or even at all reducing our head count by far the biggest driver of this is a slowing in staff turnover and we're seeing that across the board and we think that is indicative of the absence of job opportunities elsewhere in the economy if we look at the applications that we're getting unique applications that we're getting for those vacancies they're up by 76 percent even more dramatic in head office actually and so the applicant per vacancy ratio is now at 17 per vacancy that's up 2.7 on two years ago so if you so look at that the other way around if you were to apply for a job at next your chances of being successful have reduced by over 60 percent i'm not saying that you will apply or that you have got good prospects by the way but nonetheless the odds are worse and we think that is indicative of what's happening in the wider economy we think the reasons for that are very simple they're threefold first of all i should say it is at the entry level we are seeing by far the most pressure and we think a very obvious reason for that if you look at the cost of national living wage has gone up 88% over the last 10 years compared to inflation at 38%. And if you look at the cost of part-time workers and factoring the NIC, the cost of a 16-hour part-time employee has gone up just over 100% versus 10 years ago. That has meant inevitably that companies have driven for productivity next is no exception we've invested in enormous amounts of mechanization because this hasn't just affected entry-level work it's also affected the levels immediately above that as well for example in warehousing where we put a lot of mechanization in so you've got increasing costs driving mechanization layer on top of that ai making a lot of entry-level desk work much more productive and impending legislative barriers to employment. And we think what you're looking at is a big squeeze on employment. Now, no one knows how that will pan out. Our guess is that it won't pan out with some sort of cliff-age moment of sudden massive unemployment. I don't think that's going to happen. We think it's much more likely that companies will do what, in essence, we have done, which is, as and when vacancies come up, through natural turnover, not replace them. and particularly entry level where you tend to get higher levels of turnover as well. So we think this squeeze is going to be felt by the people coming into the workforce or attempting to move job rather than those in the workforce which goes some way to explaining the stability of our data book. So that was a little section just to anyone who is looking at our h2 numbers and going oh they're way too soft it's just to add a little bit of our caution to yours in terms of where we are for the full year seven and a half percent sales growth we think will deliver around 1.1 billion of profit i'm not going to walk this forward from last year i'm just going to walk it forward from the estimate that we gave in march to just talk about the differences so if we're at 1066 estimate in march in terms of the change the lion's share of the change is driven by our increased expectations of sales mainly in the first half first four million clearance sales have significantly improved these are not the sales in the end of season sale these are the sales that we get on the clearance tab of the website and it's one of the unseen big unseen benefits of having so much more capacity in that we've been able to put away and put up for sale in a much shorter time all the stock that comes out of the end of season sale so our clearance tabs have had a very good clearance tab on the website had a very good um half year and we expect that to continue right to the end of the year at seven million of profit um total platform partners we've increased our estimates from their of their profits um and total platform profit from 78 million to 80 million and there may be a little bit more upside in that as the year progresses um and we're spending more on marketing and as that marketing becomes more effective we're increasing the amount of spend so that pulls profit back a little bit um to give you the 1 1 0 5 million profit for the year end That would result in earnings per share up 12.5% assuming we can use all of our surplus cash to buy back shares in the second half. If we can't, it won't affect TSR because we'll put it in special dividend. After that, dividend yields around 2.5% and TSR around 15%, which we will be very pleased with if we can achieve that. standing back from the numbers and just to talk about the shape of the business next has evolved slowly over the last 10 years into a very different business from the one it used to be and in your pack we've given a real analyst's delight i think of the participation of every segment of our business by brand by geography given the participation the sales growth in percentages and the hours and hours of fun with your spreadsheets and getting ever more granular predictions but it does bring home that the business has changed and that the business is far less constrained by its core brand in its core market of the UK and it's a sort of story of quarters really you look at the business now we're taking nearly a quarter of our sales and by the end of the year probably it will be a quarter of our sales overseas and if we look in the uk we're taking just over a quarter of our sales on non-next brands if you look overseas where you'd expect the next brands to be and pretty much all ourselves it isn't actually we're getting we are getting some traction overseas with non-next brands the difference between the non-next branded business overseas and the uk is that overseas our wobble business the wholly owned brands and licenses are a much bigger percentage of that business and when you think about it that that's there's an obvious reason for that and overseas on all the other third-party brands or most of them we are competing with other local often dominant aggregators for sales on those brands but in the brands that we own that have much less exposure in those markets we're putting we're often the only source of those brands in terms of growth what you can see is it's the peripheral the smaller businesses that are outside of our core next uk business that are delivering the growth and if you look in cash terms it's pretty even still the UK delivering the majority of our growth next round in the UK delivering 75 million of the growth although that was boosted in the first half so you expect that number relative to the other numbers to be lower for the full year and what's driving that growth is a combination I'm going to just sort of focus on four things there are lots of things we're doing this is not a comprehensive list of all the things that we're doing to drive growth I'm going to focus on four things products the new warehouse and how that's going, our international websites where we've made a lot of progress, and international marketing. Starting with product, breaking it down into three sections. Next, third party brands and wholly owned brands and licenses. The next brand is where I and most of my colleagues spend the vast majority of our time, and there's not a huge amount to say about it, but I wouldn't want the absence of a long expose to think that it's not where we spend most of our time. The emphasis here is, as I said, the last three results on three things. First of all, really delivering units. new trends when they first appear as soon as possible with conviction and where we've done that it has definitely paid off and it does seem to be a general trend that we're seeing across everywhere that newness and delivering the right newness pays off and you can't do that old thing of saying we'll try something this season and if it works do a lot more of it next season next season it's too late secondly is improving quality improving the quality at every part of our every bit of our price architecture improving the quality the the main thrust there has been improving improving fabric and yarn and working harder with mills before we've necessarily decided which garments fabrics and yarns are going to go into to develop fabrics and yarns earlier in the product life cycle and again where we've done that that has delivered we think much better product and not just at the sort of mid and upper price points but actually most in one case in particular most noticeably at the entry price point where we've really been able to through engineering fabric and yarns we've been able to improve significantly improve the quality of our entry level product and the third thing is pushing the boundaries of our price architecture into delivering more items at the top end of our price architecture and it is worth saying we think that is the way that the market's going it's not a dramatic effect but if you look at the increase in our like-for-like product the like-for-like product is up by around one percent in price in essence factory gate prices that we pass through to customers up around one percent The mix, what people are actually buying, is up 4%. And we think consumers are buying slightly fewer, slightly better things. And that's certainly everything we can see from our sales data is telling us that. In terms of third-party brands, third-party brands had a good season, up 16%, delivering £67 million of growth. The thing that has really made the difference here has been focusing on our major brands. spent a long time building our brand portfolio adding new brands we've gone back and really focused on getting the best offer from our biggest and most popular brands and the story there is exactly the same as the story on the next next brand we have had to be braver with buying more of their new products than we have been in the past on wholesale and on commission we've had to force them to be a little bit braver about putting things that they haven't had a lot of history not force them encourage them to be braver about putting more of their newer stock onto our website and being braver with the newness and making sure that we're backing that in depth and i suppose that's the positive the negative is not not relying on last year's best selling blue v-neck or potent white polo shirt to deliver exactly the same as it did last year this year that's that is definitely not the way to be successful on brand so a bigger push for news there two smaller things to talk about um we we have got a very good sports business but it's mainly at leisure and parts of the range is people like nike adidas we we have performance items but we really want to push the performance element to offer our customers more performance sports products so we're adding brands like on running this season hocker next season so and we've sort of got a dedicated part of the website this product is available generally on the website we also if you want performance sports there's a dedicated sports club part of the website where we're grouping together all the performance sports there looking at a good opportunity for us in the longer term and a sort of an acorn and this is an acorn don't expect anything big from this but this is the type of this is the way that next grows we don't ever spend vast amounts of money building new businesses we start with small experiments that take us into new markets and seasons is a point in case this is selling high top end of the premium market and luxury goods it's small business but we are beginning to get traction on our premium website it's a separate website from next what we are able to do is advertise those products or those brands on our website or to our customer base of 10 million customers and business don't expect me to talk about it again for another five years but it's just an example of how we sort of plant a seed that may or may not be a big business at some point in the future. In terms of the wholly owned brands and licenses this is in many ways the most exciting part of the business. Our wholly owned brands and licenses grew by nearly a hundred percent overseas. They fall into two categories just to remind you. home-owned brands is where we either buy a brand like Maid or Cat Kitson out of administration and find a team to run it or where we start a new brand internally like Love and Roses and friends like these. Brands you won't really hear of every day but something like Love and Roses both those businesses taking nearly 100 million pounds so you know good small niche brands and on the other side licenses this is where we take great brands who have got let's say great adult clothing range but want to do children's wear or want to produce furniture. We use our sourcing expertise and our perks, our skills at buying those products, quality standards and all the rest of it in order to provide ranges for them, for those brands that fulfil the ethos and look and feel of the brand but give them exposure to different categories. and and the way that works is that we buy the stock and pay them royalty so it's pretty much full margin less the royalty in terms of where those brands fit relative to next and you all have seen these graphs these bubble graphs we're not great fans of them but if you say next it's somewhere sort of towards the more expensive and more fashionable end of the general market um center next on that um and show where all the brands and licenses that we have sit relative to the next brand in terms of price and fashion what you can see is that the weight of the brand is more fashionable slightly more fashionable in terms of weight but definitely more expensive so in terms of cash 55% of them for example will be more expensive 20% will be great more than 25% more expensive than Next and we think this is a good thing for two reasons first of all we think that it makes our website a more aspirational place to shop potentially attracting new customers to the website but as importantly if not more importantly attracting more brands to the website we think it makes it a more attractive place for brands that wants to go to an aggregator to come to Next and the other important point is that of course the higher the price point generally the better the economics because unit costs of shifting a 50 pound 60 pound t-shirt are not much different from the unit costs of shifting a five pound t-shirt so things are economically more advantageous and you might look at that and think that the way that we've built this business is through very clever people in the boardroom coming up with a grid and you know post-it notes and circles and having some sort of digital representation of it with marked research and nothing could be further from the truth for you know two reasons one is we don't have clever people in the boardroom and so I obviously excuse me our non-executive directors who are here today and um the other is it's just not how the real world works that's not how you create great brands for consumers through sort of market research um the way that these businesses have been built is really simple and opportunistic and it's basically about finding great people where we've got new brands it's about finding brilliant people um to drive those brands and that is you know that is a truth that we know from our own business at the end of the day the best product is driven by the best people and that's as true as the new brands that we're starting and the ones that we buy in as it is our own brand and with licenses it's about partnering with brilliant licenses and licenses that can genuinely bring something different to the table whether that be their print archive or the people that they currently employ or their point of view it's about having something that is genuinely great for the consumer that we can translate into product that those licenses couldn't produce themselves whether they're big existing businesses that you know might want to go to jordan's wear like super dry and all saints or whether they're very small businesses like rocket st george that is a very small business that just hasn't got the capacity to produce everything from a side table to a dress And the aim is to create a brilliant place, an environment, a brilliant place across all, Next, Wobble, and Third Party Runners, a brilliant place for product people to create great ranges. But if you were someone thinking I could go off and start my own brand, actually doing it at Next, you've got all the resources of the business there, We've got our systems, the access to our sourcing base, all of the tech that we have around producing quality support if you want that. So it's a great place to produce fashion. And of course the other big advantage is that instantly overnight you get access to our consumer platform as well. so warehousing distribution, our UK website, international website access to our international, our network of international aggregators, our online marketing, all the technology that sits behind our websites you don't have to develop yourself and of course the cash that we're generating that can fund these businesses. So that is the objective. There is, however, and it's very important that we're conscious of this, a risk in this. And we call this the sort of Play-Doh or plasticine risk. And, you know, those of you who, like me, have young kids or five-year-olds, you know, Play-Doh is beautiful stuff when you buy it. It's, like, smells delicious. It's squidgy and soft. It has these vibrant colors. And that's how it looks on day one. And after two and a half weeks, it's basically a crusty pile of brown plasticine stuff is all merged into one and the risk of you know all sort of retail conglomerates i think is that they end up all the brands and products ends up looking exactly the same um And I can't guarantee that won't happen, but we are acutely aware of that risk and work very hard to prevent it. And three things are central to that. First of all, it's all bought by separate teams. We don't say to the next blouse buyer, go away and buy a Love and Roses blouse and then buy a Cath Keaton blouse. Those are bought either by dedicated licensing teams that are responsible for individual licenses or by completely separate teams in the case of Love and Roses where it's their own team and often in a different location, not necessarily in Enderby either. um they're not all all the brands are this is a mistake we made when we first started these brands actually they all assumed we didn't say anything it was like a ouija board it just happened um no one everyone thought somebody else was moving the glass um we don't insist that they all um conform to next quality standards or fit standards because if they did their product would end up looking like next of course it has to be merchantable quality durability if they're high-end sofas because they're not going to be used as much so it's down to those individual brands to come up with their own standards has to be merchantable quality has to be brand has to product that we are proud of but it doesn't have to conform to next standards what it does have to do obviously is it has to conform to all of our ethical trading standards we're not that we don't want to be caught out by a brand that uses a factory that would that we wouldn't use as a group the other really important thing is that we don't share data between the teams when we started they used to all get each other's data and the first thing they did is look at each other's bestsellers and of course after 18 months what we end up with every brand came up with its version of the other brand's bestsellers so it's quite important to keep division between sort of data division between the teams and not think oh this is a wonderful opportunity to leverage our data which is the temptation you start with in terms of the parts of the business support now I just want to focus on three a quick return to the to the warehouse this is the new Elmstall 3 warehouse just so that you know how it's going capacity is up and running it's delivering more than a 40% increase in capacity on where we were two years ago the cost savings that we were expecting from the warehouse are as we expected that in fact slightly ahead of where we expected them to be it's worth just sort of looking at that in terms of long-term uh sort of trends in cost per unit this is cost per unit in real terms so adjusting for inflation of wages and you can see that sort of since 2022 we have achieved a marked um improvement in productivity in our warehouses um firstly through new sortation equipment that we introduced in 2022 then through just having the additional space from l43 and this season um through the um ramping up of the mechanization and moving to more efficient automated picking within the warehouses um we think we've got further to go on that as well um it is not quite as good as it looks because obviously wages have gone up faster than we could become more productive but not a lot faster than the average selling prices would have gone up across the group. In terms of service, this is an amber tick, so the good news and bad news here. In short, the good news is that we are delivering better service than last year. Last year, this was what we call the NOTIF rate, the orders not delivered on time and in full. and it's not quite as bad as it looks the vast majority of these are where customer orders average number of items say four or five items and the fifth one doesn't turn up next day it turns up the day after so it's not a catastrophe particularly towards the back end of last year that was not a good place to be as we've started to fire up the new mechanisation we have really since end of April started to achieve much better service levels but they are still not where we want them to be at 5% the main reason for that has been the teething problems we've had integrating the new third party warehouse control systems these are the systems that actually control the cranes that are not our software we have the warehouse management system integration you will always expect teething problems but they have been slightly more challenging than we expected we're not concerned by that it's a question of time we think we'll be around six percent by the end of i don't say we're not concerned about that obviously i'm jumping up and down um in one way but we do think that this is not this is not structural we will the the problems as we've gone along are being solved and we'll be at six percent by the end of the year and we should get to five percent at some point the first half of next year in terms of international websites who can forget this table whenever i bring this table up my colleagues groan because i think oh you're just showing masses of data it's hard to read this is a really important table it's in your pack so you have you can look at it at leisure but basically what this sums up is in jan 25 at the beginning of this year how many services we had in how many of the countries that we operate so for example that we're operated and still operating around 83 countries we only had low customers going to pay in local currency in 56 of those countries at the beginning of the year we've worked really hard over the last six months to improve that you can see that now all countries trading our own currency and you can see that pretty much every service we've increased our coverage parcel shops the only one that we haven't cracked yet and we're really waiting for the zeos transition to be complete before we move our systems teams onto that because we thought it was more important to prioritize the zs transition and parcel shops um a marketing spend is everyone of where it's more than five percent of sales in some ways that's encouraging because it shows how much more potential we've got in terms of increasing our marketing spend in terms of that what that means in terms of the this is what the countries we serve are as a percentage of the total clothing market in those countries and you can see on local currency we've gone from 70 to the potential market to 100% of the potential market of the countries we serve. There's still a way to go and the numbers aren't quite as good as they look so for example on that top line local currency although we weren't serving 30% of the market with local currency actually in January 2022 that only represented 0.2 percent of our sales so what we've in effect done is we spent a long time investing in functionality and services in markets where we weren't taking a lot of money and you could say that sounds like a bit of waste of time but it hasn't been hugely expensive and there is a chicken and egg issue here in that if you don't invest in a website that has local currency local language registration how on earth can you expect to grow the business so you'll never really know the potential of the countries that you haven't got traction in so you do all of this and the work we've done here is what explains the traction we're getting in that rest of world segment that i showed you earlier on the 28 growth we're getting there and just give you one example of this to give a bit of color on this in Japan we were marketing in Japan spending a little bit of money on marketing in Japan spring summer 24 but we were only getting £1.19 back for every pound we spent that's not nearly enough we need to be at £1.50 to really justify spending a lot of money on marketing in the interim period we've got local language registration we've optimized our product listing page which means it's much more appropriate to local markets we've got local sizing conventions which means for example we very sensible idea this actually in Japan they do sizing by the height children's sizing by the height of children in centimeters rather than their age which is actually I think so anyway we've switched to those local sizing conventions and we've improved conversion rate on the website as a result of that by around six percent we've also made sure that we're paying the proper duty and getting the product into the country effectively which is no mean feat and we've increased our prices slightly. That's moved the margin forward by 12%. Net margins have moved forward by 12% on that website. It was sub-6 and now it's in the mid-teens. What that means is that our marketing has gone from 119 to 170 and as a result of the marketing activity, which we've only really just started, sales are up 20% so far. It's a good example of that sort of chicken and egg. If you get the fundamentals right, increase the profitability of the website and then you can afford the marketing and then you get the growth in terms of marketing not a lot to say here other than overseas we've increased by 57 that number in itself is not that remarkable what is really remarkable is the fact that our returns have not only not eroded they've edged forward very slightly and we think that is all about mainly about all the improvements in functionality and everything we've done to improve conversion rate on the overseas website and the product that we've added to those websites particularly our own wobble product but it's also about the ad technology that where we're getting better at using our existing main suppliers that people like Meta and Google are getting better at using them overseas um we're forging new regional partner media partnerships in countries where um the big players in the uk not necessarily the um don't have as much of the market as they do in other countries and we're beginning to invest the time the amount in human resource in people to start marketing and doing marketing programs in the smaller countries in which we operate so kind of when you pull all that together um we've got four we've got four things um i mean they're not exclusive but they're driving growth i think what's interesting about this is is that marketing piece because what you need to realize is yes you know better product of course better warehouses and all the other services we wrap around that call center or the website functionality all of those things do drive sales but because they drive sales they also reinforce marketing and they allow us to spend more on marketing because if the customer is more likely to buy when they get to the website you can spend more money to get them there The final thing I want to talk about is cost control. You'll have gathered from the frequency with which we micromanage the allocation between our brands and next and all the things we do to manage profitability that we are obsessed with profitability and people often think that that is just about, and I say just about, it's very important, they think it's just about capital allocation and shareholder returns and de-risking the business through having adequate margins and it is about all of those things. but it's also about growth because if we can control our costs and make sure that every transaction that we undertake is profitable that means that we can afford to spend the money driving the part of business that is growing fastest and our control of costs and understanding the profitability of every element of our business is one of the things that has done most to enable the marketing that is pushing growth forward so whereas you know and in this respect and only this respect you know finance our finance teams are heroes i mean you don't often hear that in your fashion retail business but it's true that the work we do on profitability um is as important as all the other things i think what also becomes apparent when you look at these things is that none of them on their own are enough and you know if you want to sort of look at next and occasionally people sort of terrify me by talking you know using the phrase well-oiled machine and all that sort of stuff there's no well-oiled machine there's no moat there's no usp there's nothing that can't be copied or done by others success for us and the risk and the opportunity is all about execution it's all about all of these areas being there's no good having great product ranges if you can't get them out of your warehouse it's no good having great warehouses if your website doesn't work so every single area of the business has to execute brilliantly and if it does it's mutually reinforcing and if you don't it is mutually undermining so if you want to sort of look at next and look at the risks and downsides the risks and downsides are all about execution i think what has changed And by the way, opportunities. I think what has changed from 10 years ago, all of these risks were there 10 years ago, exactly the same. What has changed about the business is that whereas 10 years ago, the runway, our runway for growth was really constrained by our core brand in our core market. The difference between then and now is that the opportunity for growth outside of that core market has opened up both in terms the non-next brand we can sell and in terms of the countries that we can develop in so in the in the report we said you know we recognize the challenges of the uk economy and the challenges of executing well but on balance we think that the opportunities outweigh any of those threats and on that uncharacteristically optimistic note we'll go to questions and i've been told to remind you that in this wonderful high-tech auditorium you have microphones there so you don't have to have people running to you pick them up apparently and press the button and not only can we all hear you but it'll be recorded for the transcript as well so you'll be famous so over to questions well thank you very much so warwick Thanks. Morning Simon, Warwick Open from BNP Paribas. Two questions please. Is the opportunity to develop the Wobble brand a bigger opportunity than signing more Total Platform customers and should we sort of think of that as a bigger opportunity? I think as it stands today, yes. I think the thing about Total Platform is it's sort of, it's the difference between mackerel fishing and whale fishing. you know the total platform won't make a difference where we make a big deal and that's going to be pretty binary so in the year that we do do a big deal and as and when we we do them that will make a bigger much bigger difference um i think wobble is a much more reliable and steady source of growth than um total platform which is likely to be sporadic thank you and secondly you talked about um still an opportunity to improve the delivery service out of out of arms or is that a sales opportunity for 2026 or is it just about cost efficiency i think it there is a cost element to it obviously if you're delivering the fifth item separately you've got the extra passes there is definitely a cost element to it um i i don't think it's an immediate sales opportunity in a way that putting a brilliant range or not brilliant range is an opportunity i think it is about that slow and steady establishment of brilliant service, and I think that that takes years to deliver. So yes, it is a sales opportunity, but I don't think you should be building into your wonderful models, you know, 80% for warehouse improvements in terms of sales opportunities, because I think it's much longer term, great service is a longer term opportunity to acquire and retain customers rather than immediate fill up to sales. Excellent.

It's Adam Cochrane from Toad Japanic. There's been a lot of chat about business rates being changed in the UK, particularly with regards to larger stores. Would this be of impact, do you think, to any of your larger stores, and would it change any way you look at them?

Yeah, we very rarely have the opportunity to take larger stores. The answer is yes, it would, but it's unlikely to be the defining characteristic on that. on the appraisal. Just to sort of borrow a background, we estimate that the net effect of the changes on rates overall will be 5 million more costs in warehousing, 3 million less costs in retail. I think I'm right.

2 million, so it's a small number, depending on what Rachel Reeves does in the budget, but I think if you take the mid-case, we think it's only about 2 million. That's right, thanks. And then a few years ago, we talked about increasing the number of brands and items online as being a real competitive advantage you're now talking about sometimes removing or at least trying to change high volume items what's the overall outlook in terms of number of lines brands etc that you're offering online and compared to where you would like to be or where you where you were

whole like to be thing and that suggests that the business is you know somehow the result of my will um which mercifully uh for you it isn't it you we will add lines as and when we can see they're incremental and profitable take them off when we think they're duplicative and unprofitable i think what is likely to happen is that you will see an increase in the amount of I think in the short term we will continue with focusing on getting the best of our bigger brands rather than new brands on the website there will be some new brands but those new brands will be limited to the areas we're talking about performance sportswear and sort of luxury brands on the seasons website so I wouldn't want to make a prediction as to what the balance of those effects are going to be

okay good morning william was from bernstein the first one's just on the brand mix that you've been experiencing so you've got positive momentum with higher asps versus like for like pricing excluding seasons how do you see that brand elevation or the increase in asps going forward and do you think you've highlighted the play-doh risk in brand the number of brands do you think there's also a risk in terms of average pricing that you're putting forward to your customers

well again i think um first of all be very careful the word momentum my experience is very little momentum in in retail and i don't think we are getting momentum on average selling prices going up it's just something that we're pushing is you know going faster and faster as we push it harder and harder this is very much a pull this is what the customer is choosing to buy and the the way that we build our ranges isn't by deciding what we want our customers to buy it is our job is to guess what they will themselves want we're going to make them want it and so who knows which way that that trend is going to go all i can say at the moment is that it appears to me the most exciting products we're looking at are the slightly more expensive ones to make so i think i can't see any change in that trend but it will change at some point these things waxing away

great and then the second question's just on international i think in the the report you mentioned the opportunity to expand breadth and availability in international to support that growth can you give some idea of what that looks like and what you're doing at the moment is it categories skew count size availability color availability things like that thanks um in terms of availability by far the most important thing we're doing actually is in our aggregation business in europe

with the transition to ZEOS and this is where we're moving the warehousing of our own direct websites into Zalando which means that there's a shared stock pool and what that means is that both our websites and their websites will have access to um a bigger pool of stock and we think that will increase availability for the aggregator be less less of a market effect for next because we always drew on our uk warehouse where the european hub didn't have the stock available so actually the way the customer will experience it on our website will be about more things arriving sooner in one parcel than coming in two parcels

thank you uh morning richard chamberlain rbc um couple from me please first one is on sourcing um so i've wondered what uh what's the current percentage of sourcing done in us dollars and how are you thinking about potential to reinvest those gains into next year um are you thinking that's a good opportunity to for instance improve quality style and so on of the offer next year and the second one second one is on um international uh rest of world you you gave um japan uh as an example talking about um kids wear and so on but is it still the case that rest of world is seeing a sort of broadening out uh more into women's and men's now in terms of the you know what's actually driving the growth of that at that segment thank you yeah okay um good question sophie

in terms of broadening we're seeing that across the board not just in the rest of the world we're seeing the parts of our range we sold the least are growing the fastest so in territories where we were selling mainly children's ware we're seeing men's and women's growing fastest and that trend continues not just in the rest of the world but in all the other territories pretty much all the territories in which we're selling In terms of sourcing a dollar gain, I think most of the stock we buy is dollar denominated. I'm going to guess around 80%. What was yours? A bit higher, lower. Anyone else? It's a lot. I think you've got to be very careful about assuming that an improvement in the dollar rate translates straight into an improvement in the factory gate price. because a lot of the costs are in local currency and so if the dollar weakens as a result if it's a dollar weakness then actually you don't get very many gains if it's pound strength then that's the only time you really get that translates through into factory grade prices but in answer to your broad question our aim is that where we get increases in costs or decreases in costs in the goods of um in the input cost of goods we pass that straight through to the consumer we did increase our bought in gross margin very slightly this year because the nic increased but generally our view is pass it through to the consumer and here i wouldn't want you to think again that it's clever people in the boardroom going oh we'll put that into quality or we'll put that into price or we'll go higher and lower and it because that's not our decision the person will decide will be the shoe buyer or the blouse buyer and they will decide to slightly greater fabric do i put a better print in do i lower my prices it is all done at buyer level rather than boardroom level so i wouldn't want to give you a steer as to how any games we get are invested my guess is that you know if we see at the moment what those games are being invested in is better quality better you know better designs better prints um whether that's the same next year will depend on hundreds of people who work at my business.

Thank you. I'm from UBS. A couple of questions. First, I think you've pointed to international marketing returns being extremely strong. If they're as strong as they are, why wouldn't it grow another 50% in the second half? Why only 25? And the second one, you've talked about potentially or if you mind it to potentially change the uk sort of return on stores payback periods or heading in that direction at least anyway what does that mean for err for buybacks of both capital allocation decisions it doesn't mean anything for err or buyback obviously

at 8% you know changing this because I mean stores are only the retail business is only 20% of our business and the retail new space might count for 1% if we're lucky of retail sales for us to change our ERR as a result of that it would be wouldn't make sense I think the important thing is that every investment decision we make we're balancing two things risk on the one hand versus return on the other and I think the point I was making about the stores is if we are able to de-risk the stores in one way or another either through higher hurdle on profitability or more flexible rents then we will consider moving the payback out but it won't affect our ERR and in terms of marketing it might you know I'm not going to rule out it growing I think it's very likely to go about 57% because I think a lot of the games we got were about these website improvements where we've already annualized some of them versus last year. So I think it's very unlikely to be as high as 57%. Whether it's more than 25% will depend entirely on how we trade.

Hi, it's from JP Morgan. Just two really quick ones, please. First of all, in terms of the pressures obviously being faced by Marks and Spencers in the first half, just wondering if there was any learnings from that for you, really, in terms of the customers that you were acquiring. Could you sort of leverage that in some way going forward? and then second one please was just obviously you have a sort of lot of data presumably on customers by income demographic given the data book and just wondering if you could talk a little bit about how the different income demographics um were performing in the half across your sales base please thank you yeah the answer is we don't have income data about our customers because we have we have relatively light credit score

so we don't we don't do there are a small number who are on the edge series we do affordability checks on but the vast majority we don't know what what our customers are earning so i wouldn't want to give you any data um on that um and in terms of uh lessons um from we don't know which customers have customers when they come to us don't say oh i'm coming to you because i can't go on somebody else's website um so i i bet in all honesty there isn't there aren't any um lessons that um we have learned that i would be willing to share um and in truth there aren't i i i don't think there are any that i know of i'm andrew hollingworth from what advisors can i can i just ask you a couple of clarification questions from questions that will come up before um so just on your follow the money just properly well fair enough no i'll take the criticism let's see

um on your um follow the money um commentary this morning which i think is a sort of zero sense of where to go about things um the gentleman in front of me asked about the sort of wobble um situation could you just talk about whether or not the success of the business overseas gives you more confidence in terms of wanting to commit capital to buy more brands to innovate more brands internally and so on i'm not expecting you to tell me what you're going to buy just yes is a perfectly acceptable answer or no because is another answer um The answer is no. I don't think so.

I mean, in reality, when you're looking at investing in a new brand or a new team or buying something, we're mainly looking at what the business currently does rather than what we think we can do with it because those are the returns that we look at most carefully. In terms of the upside, are we thinking overseas UK? Are we just thinking total online? the more we take online the more the upside is there so indirectly yes but we're not thinking oh this would be a brilliant band to sell in japan or saudi arabia so let's go buy it um because we would make a lot of mistakes that way

okay fair enough um and then on the um international marketing question um it is there i i get the sets orientated is there any reason why in three years time from now having done everything you've done overseas that we couldn't be spending multiples of what we're spending today and and it feels like the world's a big place it feels like the people you use for your marketing spend would be delighted if you'd spend three times as much could you just tell us why that might not happen is there a limitation that i can't see i think it's all down to execution

you know we will only be able to spend more money on marketing if we continue to improve our websites we continue to see a lot will depend on convergence of global fashions whether that continues at the pace we think it's happening at the moment and so it comes down to internal factors product ranges execution and service and external factors and speed willingness to um trade with us but if you keep getting returns you're getting you'd be happy to spend significantly more in the in the way that you have done in the first half we're not capital constrained you know the reality is we're talking about we're returning 350 million pounds this year in one way or another that we can't another sort of over and above the 111 we've already spent by way of return so we are not capital constrained as a business if something makes money we will just carry on investing in it thank you very much

Hi, Jeff Lowry, Rothschild & Co, Redburn. Could you help us understand a little bit more about the behaviour of your customers in the UK who have a credit account? i'm not really talking about this half year more this broad sweep of you continue to add customers with an account but they seem to spend more with you but they're less reliant on your provision of credit to them than they were so what sort of triangulates all of this for us and is that growth in credit customers a function of converting ones who were cash or is there something you know going on beneath the surface that we can't see in terms of the overall profile thank you

so I think first of all the vast majority of credit customers are not first-time customers so it's a question of converting cash customers into credit customers in terms of behavior what we're seeing is in terms of delinquency and default rates I think a lot of that is about how more and more credit is being joined up you know that if you default on your £100 debt to next you might not be able to get a mortgage so I think that is what's driving a sort of consistent reduction in debt rates and then I think also a lot of customers who are switching from some of the customers are switching from cash I think more of them and I haven't got numbers for this but I think more of them are just using it as a try and buy facility rather than a proper credit facility You've got to press the button, apparently.

My name's Andy. Just one. When we toured your warehouse, you talked about potentially offering the spare capacity to other brands Zalando-esque way. Obviously, now you have maybe more capacity from shifting your stock to Zalando, but then you also talked about improving the performance and reliance of the brand. Is that still an opportunity?

Yes, I think so. It will depend on and we are talking to a number of people about that so that is an ongoing discussion it's not a huge margin business so i don't think it's going it's not so it won't be as it won't generate as much pounds profit as total platform but it is a profitable business and we're still talking to a number of people about offering that service

Hi, David Hughes at Shore Capital. A couple of questions from me. First of all, on pricing and the brought in margin, obviously, you've increased that a little bit to offset some of the higher costs. Did you see any kind of customer reaction to this? And if there is a further increased cost, either through the Employment Rights Bill or through another minimum wage increase next year, do you think there's more that you can do there to offset that cost?

and then secondly just on international alongside the improvements you're making in the 83 countries do you have any significant plans to expand that to cover kind of even even more of the globe in terms of more of the globe not really um there are countries that we the big countries that we're not in either you know russia either there are you know political reasons for not um trading there um or the market's just not ready. So I'm not expecting the number, I'm not expecting that 83 number to change dramatically. In terms of pricing, it's very difficult to see a response to 1% increase in price. So the honest answer is we don't know what the response to that was. I don't think there was any, if you ask my gut feeling, I don't think there was any response because the 1% is still significantly less than wages are going up by. so actually in share of wallet terms that 1% increases again for customers whose wages on the whole are going up by 3% slightly more than that so I don't think it's been a problem and then in terms of our ability to pass on I'm often asked about what's your ability to pass on the price and the answer is that we print the tickets we print the price ticket so we've always got the ability to do that And our view is that you have to do it, you have to maintain the profitability of the business, because if you don't, when you look at the, what would I have to gain by way of sales in order to sacrifice, to make back the margin I'm sacrificing, the answer always comes back, don't do it. And so our view is that where we get better prices from our manufacturers, we pass those through, and we've done that consistently for the last 20 years, even in real terms, the price of clothing generally, not just that next has come down, we're getting better quality for less um money but where your costs go up you have to cover them regardless of whether they have an adverse impact on your sales or not because it's more important to maintain the profitability of the business for all the reasons that we discussed than it is to maintain your top line hi um a couple of questions from me please

um firstly i would like to understand how the mix of the third party brands you sell between wholesale and commission developing and are you still making a concerted effort to move more into commission and maybe the reverse of that as well when next sells on international aggregator platforms are you doing that mostly on a commission basis or on wholesale basis and my second question is about that was two questions i have three now all right sorry um that i don't think it's uh... but you think you would be looking for that you don't want to look at what the customer actually want and then i'm looking at there are deep things that you mentioned and don't think you didn't know if you're trying to if you're having 26 weeks of cover almost uh... how do you balance those two requirements because fashion and you don't want to probably get into fast fashion but the fashion needs constantly evolve very very quickly are you looking at more near term sourcing i think it's about

so in terms of the last point which is a really important one and by the way 26 weeks of cover doesn't necessarily mean 26 weeks lead time the continuity product will have much longer weeks of cover there are products we can react to faster and we are developing new sources of supply closer to home which are getting us much faster lead times we're growing our presence in Morocco at the moment so I wouldn't want you to think that that increase in that all in stock early means that we're not pushing to develop product faster but our universal experience is that it's not the time taken to make the garment that determines whether or not you are you capture the trends it's the speed at which you go from seeing the trends to executing it with authority and at high quality and that's where we focus that is where we're focusing all of our time and the whole thing about developing fabrics earlier because there are fabric trends that emerge before garment trends that is critical to that process in terms of aggregator pretty much all of the business we do with aggregators is on commission and then in terms of wholesale versus commission we're much more agnostic about that than we used to be so we're not there was a point at which we were encouraging wholesale to move to commission we're not we're not really doing that anymore We'll go with whichever way the brand goes. And in terms of growth, we're not seeing significant difference in growth between the two. If anything, the improved focus we've got on buying the right quantities of brands and backing newness obviously benefits wholesale more than it does commission. So the big push has benefited wholesale more than commission. Pleasure. And on that... exciting notes we'll finish thank you very much everyone