Fashion and home retailer Next plans to invest £20 million in its IT systems over the next two years to help grow its online business.
Sales for Next Directory, the company’s online and catalogue business, grew by 12.4 percent in the year ended January 2014, compared with the 1.7 percent growth in Next’s physical retail stores. The group’s pre-tax profit increased 11.8 percent to £695 million, the company said in its results last week.
“The rapid growth of our Online and Home businesses means that we have an unusual number of big systems and warehousing projects starting in the current year,” Next said.
“These projects will give some operational benefits but are mainly required to facilitate continued growth or replace obsolete systems.”
Next classified it IT investments as revenue costs (maintenance-type costs) and capital costs (one-off, fixed assets costs). It said that most of its systems development costs are revenue costs, while hardware and other infrastructure are depreciated over the life of the asset.
It provided a breakdown comprising four main IT projects for 2014/15. The most costly is an upgrade of store till, back office and payment systems, costing £8 million in capital and £3 million in revenue.
This is followed by a £5 million capital cost of investing in data centres and systems office refurbishment.
These two projects are expected to last one year.
Meanwhile, the remaining two projects are expected to last two years. These are a £3 million mainframe upgrade and modernisation project and a £1 million cost associated with re-writing the company’s international website and converging it with the UK.
Next said that its international online sales have grown, through initiatives including translating the website and accepting new domestic currencies. It hopes to grow this market even further by introducing the option to pay for goods via Paypal in 2015.
The retailer is also expanding its Home warehouse at a capital cost of £11 million, bringing the total costs of IT and warehousing projects to £31 million. It expects £25 million of this total to be incurred in the year ended January 2015.
IT becomes board issue
Meanwhile, Next chairman John Barton welcomed Michael Law, group operations director and in charge of IT at the firm, to the board.
Law, who has been in the role since 2010 joined the board in July last year. He is responsible for all systems, warehousing, logistics and call centres at the company. He has been responsible for group IT since 2006.