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Next expects tough times ahead as profits rise


UK clothing retailer Next has reported a nine per cent year-on-year increase in profit before tax (PBT) today, but warned that the retail landscape has changed significantly in recent months.

PBT reached £551 million for the 12 months to January 2011 and revenues increased one per cent to £3,454 million, but CEO Simon Wolfson repeated a claim he made towards the end of 2010 that retailers can no longer expect to plan for continued like-for-like (LFL) sales growth.

“The consumer environment is likely to be dominated by the challenges of global inflation, public sector cuts and limited growth in consumer credit,” he explained in today’s prelimiunary results statement.

His comments come as Next’s retail arm increased its full-year profits, despite a small decrease in overall sales.

Retail sales finished the year 2.3 per cent down on last year, but the figure is distorted due to its comparison with the previous 53-week financial year. On a 52-week basis, total VAT exclusive sales were down one per cent and LFLs dropped four per cent.

Earnings per share for the group were up 18 per cent year-on-year to 222p though, while total dividend increased 18 per cent to 78p. A cash inflow of £92 million, before share and bond buybacks, was also achieved.

Wolfson is confident in Next’s ability to perform well during 2011 in what he expects will be a tough trading environment, and claims the company can continue investing in the Next brand and new avenues of growth such as Home stores, UK online and Next Directory overseas.

“The year ahead will be yet another challenging year for retailers and, if anything, things are likely to get worse before they get better,” he commented.

“Retailing will feel like walking up the down escalator - we will have to work hard to stand still.”

“However, Next is well prepared for the current environment: our cost base is under control, we have an efficient well?financed balance sheet and continue to generate strong positive cash flows.”

Published on Thursday 24 March by Editorial Assistant

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