British clothing retailer Next (NXT.L) joined the one billion-pound profit club on Thursday, but while investors celebrate, they are also starting to worry about the lack of a clear succession plan for its star CEO of 24 years Simon Wolfson.
His stellar track record has made Next one of only a handful of big British companies closely associated with their boss.
The 57-year-old, who joined Next in 1991 on the shop floor when his father David chaired the business, has helped steer it through Britain's many economic ups and downs, building a vast online business, handsomely rewarding investors via a 12-fold increase in the share price, and priming the group for a new era of international expansion.
But after such a long and successful tenure - Wolfson is by far the longest-serving head of a FTSE 100 business - investors are getting nervous about what will happen should the CEO, who personally writes Next's 60-page results statements, decide at some stage to step down.
"Simon's arguably the most successful CEO or strongest CEO in the FTSE 100 over the very long term. The flip side of that coin is a natural level of concern if at some point for any reason he wasn't in the business," said James Goldstone, fund manager at Invesco, a top five Next investor.
Several major investors in Next told Reuters their anxiety was compounded by a lack of shareholder and media engagement by Next executives below Wolfson, making it difficult for them to assess the depth and level of leadership readiness, or bench-strength.
Wolfson's sale of more than 29 million pounds ($37 million) of Next shares last September even prompted some fears of a managed exit and rumblings persist about potential political ambitions. Wolfson has sat as a Conservative Party peer in Britain's House of Lords since 2010.
"There is a reasonable amount of key man risk with Simon," said Will McIntosh-Whyte, a multi-assets fund manager at Rathbones Asset Management which has Next shares in its higher risk portfolios.
When asked about succession plans, Wolfson would not be drawn on the issue: "I think it's really unhelpful for companies to discuss these things in public," he said. He added: "I am only 57".
BENCH STRENGTH
The most senior executives below Wolfson are Richard Papp, group merchandise and operations director, Jane Shields, group sales, marketing and HR director, and Jeremy Stakol, group investments, acquisitions and third party brands director. Finance chief Jonathan Blanchard has been in his job for just nine months.
Investors said Christos Angelides, the CEO of clothing retailer Reiss, which is 72% owned by Next, is also one to watch. Angelides previously spent 28 years at Next and investors say he is highly regarded by Wolfson.
While shareholders have met Blanchard at Next's results meetings, they said they have had little or no contact with the other executives. Unlike other major companies, Next does not host a Capital Markets Day, an event often used to showcase top talent to shareholders.
Investors point to a contradiction between Next's comprehensive financial reporting, which is scrutinised by economists and analysts for its commentary on inflation and consumer demand, and the absence of any succession narrative.
Some investors seem prepared to accept that the necessary planning is in hand, overseen by chairman Michael Roney.
One top 20 Next investor said Wolfson had always said that well-run businesses do not depend solely on the CEO: "Whilst we don't have much visibility on Next's bench strength, we sense the CEO has a strong executive team around him."
Investors also have various theories that could explain why Next may be so guarded about its senior executives, such as not wanting to advertise them to rivals, or not wanting to create factions, with people coalescing around those they perceive to be the favourite.
"If you're advertising to investors in order to reassure them that there's no succession issue here, that you've got these two or three phenomenal people, you're also advertising them to all your competitors," said Invesco's Goldstone.
The "key personnel" section of the image gallery on Next's corporate website only carries pictures of Wolfson, Blanchard and Roney.
Investors also said Next has deliberately not put a time frame on Wolfson's remaining tenure to avoid a ticking clock of expected announcements on what comes next.
'SKIN IN THE GAME'
Investors said that Wolfson tells them he is still at an age when a lot of other executives are taking a CEO job for the first time.
The average age of CEOs in the UK's largest 150 listed companies was 55.6 in 2024, with 5.2 years the average tenure, based on data from headhunter Spencer Stuart.
Investors said Wolfson has not given any suggestion that he is coming close to having had enough.
His passion for Next and his understanding of the finest details of the business are as evident as ever, they said. One executive from a UK retail rival said Wolfson was said to know the lease length and rental deal of every store in the group's estate.
Investors also said that Wolfson seems particularly energised by the opportunity of Next’s fast-growing overseas business, given that its market share remains fractional in almost all of the overseas markets in which it trades, and by the potential of its Total Platform business which facilitates third-party retailers selling goods online.
"It’s not normally a time that you'd choose to handover, when you’ve got this really exciting opportunity that you want to seize," Ben Preston, fund manager at Orbis Investments, another top 20 Next investor, said.
And despite last year's share sale, Wolfson remains a big Next investor with a near 1% stake.
"He's still got a lot of skin in the game," a fourth top 20 investor said.
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