Next hails ‘profitable digital marketing’ as spend doubles

Next ramped up international marketing spend by 50% during the third quarter, as the retailer hailed the success of its “profitable digital marketing”.

The high street giant claimed the growth of its international online sales were “better than expected”, because the business was able to “spend more on profitable digital marketing than anticipated”. As a result, third quarter international marketing spend rose 50% – double the previous guidance – driven by the “strength of the returns” Next was able to achieve.

Explaining its marketing budget is not a fixed sum, the retailer reiterated that as long as returns remain above its hurdle rate the business will continue to “carefully increase” its investment.

Next’s marketing budget is determined by the maximum the business can spend without breaching its investment hurdle, which is to generate at least £1.50 of incremental profit for every £1 spent on marketing.

In the 13 weeks to 25 October, Next full price sales rose 10.5% compared to the same period last year, £76m ahead of initial guidance. According to the retailer, sales “overperformed” in both the UK and overseas.

UK sales rose 5.4% during the third quarter. This is ahead of expectations, but behind growth of 7.6% during the first half, when Next benefitted from favourable weather and the cyber attack on high street rival Marks & Spencer.

Online UK Next brand sales rose 4.2% during the quarter, with label (non-Next brand) sales rising 13%, driving a 7.8% uptick in total UK ecommerce sales. UK store sales rose 2% over the period.

Overseas sales increased by 38.8%, ahead of the 28.1% growth achieved in the first half. Overall, total product full price sales rose 11.2%.

Next CEO: ‘We have a much larger runway for growth’

Buoyed by the strength of its third quarter, Next is expecting a 7% uptick in full price sales during Q4 – adding £36m to the forecast. The retailer is also increasing its full year pre-tax profit guidance by £30m to £1.1bn

Speaking on the publication of the retailer’s first half results in September, CEO Lord Simon Wolfson told Marketing Week the success of online and international sales has given the business a “much larger runway for growth”, despite Next being a “well established” brand.

According to Wolfson, the business wants to tap into the opportunities provided by international and non-Next branded sales, which make up around a quarter of growth.

Having increased its international marketing investment by 57% to £31.4m during the first half, Next estimated marketing activity was responsible for 17% of the 26% growth in international direct sales.

The retailer claimed the incremental profit per £1 spent on advertising rose 2% to £1.75 in the first half, thanks to a combination of better media choices, “competitive” pricing and improved web functionality.

Last month, the retailer discussed working closer with Google and Meta to explore new tech, trying to better maximise the opportunities offered by new platforms like TikTok and developing new regional media partnerships with the likes of Line in Japan and Baidu in China.

Next has also been rolling out advertising to smaller international markets that were previously seen as too small to justify the spend.

In March, Wolfson told Marketing Week the business would never reduce marketing spend in the UK to increase investment overseas. He explained the team assess success on a campaign-by-campaign basis to determine whether individual campaigns make a profit or not.

“If they make a profit, we do more of them, if they don’t, we do less,” he said.

“The only reason we’ll grow our overseas marketing budget is if we think we can profitably invest more money in marketing.”