Next pulls off another profits gain despite slow sales

The UK-based fashion retailer on Thursday posted a solid rise in first half profit and a hard earned sales gain after selling more full-price products than expected. It also stood by its full-year outlook.

The results announcement was short on product info but the numbers were pretty pleasing, even though a lack of spectacular growth did mean its shares fell in early trading.

Next said it made a pre-tax profit up 7.1% to £347.1m in the six months to July, with net profit up to £277m/183.7p per share, from £257.7m/168.8p a year ago. Revenue rose to £1.89bn from £1.85bn.

But total retail sales inched up only 0.2%. However, with full price sales up 0.8%, margins looked healthy. Net new space contributed 2.2% to growth.

Directory (online) sales in the UK grew 6.3% and leapt 24.1% overseas and the company said full price Next brand sales for H1 were marginally ahead of its expectations, up 3.5%.

“With property commitments rising faster than sales, it is surprising that retail margins moved forward,” said Next in its trading statement.

The main reason for the margin improvement is that its buying teams over-achieved against their target margin, assisted by better currency rates. In addition, productivity improvements and the closure of underperforming stores meant that wage and property costs did not rise as much as might be expected.

Looking ahead for fiscal 2015, the company is maintaining its sales guidance for the full year issued with its trading statement at the end of July. Full price sales for the full year are expected to be up 3.5-6%.

The company still expects its group profit before tax for the year ended January 2016 to range £805m-£845m.

Know what’s next. Become a WGSN member today to benefit from our daily trend intelligence, retail analytics, consumer insights and bespoke consultancy services.