Next have posted good results for the first half of the year as additional retail selling space and increased online sales drove an increase in profits.
Sales are up 2.2 per cent to £1.67bn as the fashion retailer made changes to full price sales, lower unprofitable markdown sales and cost control which improved operating margins in both the Retail and Directory sectors.
Lord Wolfson, Chief Executive of Next said: “The Group has made good progress in the first half, delivering profits at the upper end of our expectations. Looking ahead the economy looks set to improve moderately, albeit at a slow pace and with the risk that credit easing may not translate into growth in real earnings.
“We remain confident that we can deliver growth in sales, profits and earnings per share for the full year.”
Shareholders benefited from the news as earnings per share jumped up 19.9 per cent to 142p as Next stated their key financial objective is to deliver sustainable long term growth in earning per share. Strong cash generation have enabled the company to buy back a further 170m on shares which has enhanced EPS by a further 6 per cent. Profit after tax is up 13.8 per cent to £217m.
James McGregor of retail consultants, Retail Remedy commented: “More strong numbers for Next, which is without doubt one of the strongest retail outlets on the UK high street. Like Argos, its online channel, Next Directory, is thriving and it instinctively understands the digital mindset.
“But even Next isn’t perfect. While its menswear is strong and its Home division superb, its bricks and mortar womenswear offering is far too safe and acts as a drag. If Next can nail womenswear again, then its numbers could be considerably stronger.”
Next, which now takes shorter leases on new retail space and added 145,000 sq ft of trading space in H1, explained in a statement that “new space is highly profitable, making 22 per cent net margins, before central overheads.
It added: “Without new space our Retail profits would have declined throughout the credit crunch.”