Clothing and furniture retailer Next has seen total sales rise 4.5 per cent in the first half of its financial year, it has been revealed today.
Continuing its focus on increasing its multichannel offering, the retailer reported that sales within its online business Next Directory jumped 13.3 per cent on last year, demonstrating the importance of a long-term digital strategy.
Retail sales for the 26 weeks to July 28th 2012 increased by just 0.2 per cent as new stores outperformed existing ones, offsetting a low like-for-like performance.
Simon Chinn, Lead Consultant at analyst firm Conlumino, believes the retailer is to be congratulated for a positive performance given the current state of the high street.
“Next has reported a solid set of first half results as the retailer remained resilient against a tough economic climate and this summer‘s unseasonable weather conditions, which diminished footfall to its stores over the past three months,” Chinn said.
“Next‘s well established multichannel proposition has put it on solid ground to capitalise on more people browsing its offer online than in its stores during the washout start of the summer.
“The strong growth of its Directory division underlines the importance of Next‘s online and catalogue offer, which continues to be the group‘s real growth driver.
“While stores sales are weaker by comparison, overall retail sales were up slightly, with sales from new space offsetting falls at like-for-like stores.”
Next‘s end of season sale also performed strongly as customers rushed to find a bargain and total stock rose 8.7 per cent with cash recovery in line with the group‘s forecasts.
Following these results, the group expects brand sales growth of two per cent to 4.5 per cent for its full year and group profit before tax of £575 million to £620 million, up 2.6 per cent on previous forecasts.
The fashion retailer also announced its intention to buy back around £200 million of shares this year having already spent £112 million buying 3.9 million shares, though Chinn warned that the company should remain cautious about its position in the market.
“While Next‘s first half performance puts it on stronger footing than some of it other high street rivals, the challenge of ensuring longer term profitability across all stores is an issue that still needs to be addressed,” he commented.
“While new space has contributed to positive retail sales overall for the first half of this year, the fact remains that sales from existing stores remain in negative territory. The weakness of some of its existing estate raises the question about the long term viability of some stores.
“With a growing amount of spend moving to its Directory business and continued softening of sales at like-for-like stores, Next will have to assess the current shape of its store estate to ensure it continues to generate sales and profitability for the group going forward.”