The Financial Performance And Position Of Next Plc

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The purpose of this report is to analyse the financial performance and position of Next PLC for the year ended 24th January 2015 compared to the previous year. The tools used to do this are called ratio analyse, this is a quantitative method used to measure profitability, efficiency and liquidity.
“NEXT IS A UK BASED RETAILER OFFERING EXCITING, BEAUTIFULLY DESIGNED, EXCELLENT QUALITY CLOTHING, FOOTWEAR, ACCESSORIES AND HOME PRODUCTS. NEXT distributes through three main channels: NEXT Retail, a chain of over more than 500 stores in the UK and Eire; NEXT Directory, our home shopping division with over 4 million active customers in the UK and overseas; and NEXT International Retail, with almost 200 mainly franchised stores.”(NextPLC, 2015:
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Operating profit margin and gross profit margin are the most commonly used ratios used to compare profitability. Gross profit margin only uses the direct costs of production, whereas operating profit margin factors in both direct costs of production and overheads giving a more accurate representation of profitability and is a strong indicator of a company’s long term ability to survive and grow, however comparing the two will help determined which departments need improving (J.B Maverick, date unknown). Nexts operating profit margin for 2015 is 20.30% which is a 0.97% increase from the previous year, this could be due to a decrease in overheads or direct costs of production, again this beats Nexts main competitor Debenhams ratio of 5.77% making Next the more appealing choice for investors. Next have also experienced a growth in gross profit margin of 0.43% from 33.16% in 2014 to 33.59% in 2015, this increase proves that next has managed its direct costs better and have been able to increase its revenue, also this increase will provide reassurance to investors that their investment is safe. This ratio is also bigger than competitor Debenhams which only managed a 12.88% gross profit margin in 2015. Nexts increase in both profit margins is even more impressive due to the national minimum wage increasing by 19p

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