Next incentive scheme bets on one-third rise in share price

Next's management team placed a £2.6m bet yesterday on their retailing skills seeing off a resurgent Marks & Spencer as they signed up to a new management incentive scheme that could net them a £13m windfall in four years' time.

Next's management team placed a £2.6m bet yesterday on their retailing skills seeing off a resurgent Marks & Spencer as they signed up to a new management incentive scheme that could net them a £13m windfall in four years' time.

The fashion chain's top employees are gambling that shares in Next, which have risen 36 per cent during the past 12 months, will soar by more than one-third over the next four years. Yesterday, Next's shares gained 7p to £15.04.

Shares must hit at least £20 by July 2008 for their bet to pay off. Should they rise above £24.50, a handful of senior staff will reap five times their initial investment. But if Next's shares languish below £20, all bets are off and the employees, including Simon Wolfson, the chief executive, will lose their money.

The company is matching the £1.5m pledged by the chain's top four directors and a group of senior employees with special bonuses worth £1.96m. After tax, the payout is worth £1.2m.

Nick Bubb, an analyst at Evolution Beeson Gregory, said: "Next fancy their chances of getting the share price above £24.50 in four years' time and if they do all shareholders will benefit. So Next isn't scared of a revived Marks & Spencer."

Mr Wolfson, who is investing £500,000 on the bet, is the only one of the top four executives that is not receiving a special bonus. The company said Mr Wolfson had "considered it inappropriate to benefit" from the awards because he was consulted about them.

David Keens, the finance director, and Christos Angelides, the product director, are each investing £200,000. Next has awarded each of them £400,000 before tax. Andrew Varley, the property director, is investing £100,000 and will receive a bonus of £200,000.

A Next spokesman said the scheme was designed to encourage its key staff not to leave. He said the march of private equity houses on to the high street had ratcheted up the possible rewards for many of Next's rival retailers, such as Rob Templeman, the boss of Debenhams. The top managers at venture capital-owned retailers all have a stake in the business, worth millions once their backers opt to sell up.

"Our scheme isn't designed to compete with that but in that environment we wanted to put something in place that added to the incentive of staying at Next," the spokesman said. Next said shareholders and the Association of British Insurers had given their backing to the scheme, which would add £2.7bn to its market valuation should the shares hit £24.50.

Next also unveiled plans to buy back up to 6 million shares.