Shareholders unhappy about Next directors' easier bonuses

Fashion chain Next received a warning shot from shareholders today after it softened the rules on bonuses to boost payouts to directors.

The firm’s remuneration report failed to win backing from almost one in four shares that voted at the meeting. More than 16% voted against, with 8% abstaining.

Under changes to the rules to set less taxing targets introduced in September last year, Next’s directors gained an extra £351,000 (€400,135) between them.

Under Next's previous measure, the company's pre-tax earnings per share (EPS) had to increase by at least 5% for any bonus to be paid.

No bonus was paid for the first half of the financial year, but the goalposts were moved for the second half – with Next having to achieve pre-tax profits of more than £427m (€486m) and pre-tax earnings per share of 215p or more.

Next managed both these targets – just – after reporting pre-tax profits of £429m (€488m) for the year to January and a pre-tax EPS of 221.2p.

Other changes to the firm’s bonus scheme will also lift the potential maximum annual bonus of the chief executive from 100% to 150% of salary.

Current boss Simon Wolfson earned £605,000 (€688,300) so the changes could give him a potential maximum bonus of more than £900,000 (€1bn). Any bonus above 100% will be paid in shares.

Despite the outcry at the increased payouts, Next has weathered the current recession better than most rivals in the sector so far.

The firm has held its dividend payouts and in a trading update earlier this month, lifted profits and sales forecasts following better than expected trading.

Like-for-like store sales in the 14 weeks to May 2 were 2.3% lower – much better than the 6% to 9% decline predicted by Next for the first half of the year.

Next said the figures should be treated with caution due to factors such as a later Easter break.

However, it raised its sales guidance for the first half for like-for-like declines of between 4% and 7% at its stores, and added £15m (€17m) to its profit forecast.