Next profits surge as retail presence grows

The retailer, which overtook Marks & Spencer when it announced £695m annual profits earlier this year, said it experienced its ‘strongest sales growth for many years’ in the six months to July 2014.

Sales climbed 10.3 percent to £1.8 billion as it opened new stores, introduced new ranges and developed its online business.

For the first time in several years, Next said its retail business contributed more to the growth of the company than its online UK Directory business.

The group said profit from its retail division jumped 22.6 percent to £152.3m, as it opened 2.4 percent of new space, including larger format out-of-town homeware and fashion stores.

Next Directory grew profit 10.2 percent to £172.1 million, with sales in the UK growing 11.5 percent.

The group said it has added to the four catalogues it publishes a year with ‘New In’ publications that showcase new ranges every six weeks.

It also introduced a free next-day-to-store delivery service last October, which initially covered 72 percent of UK stores but now covers 94 percent of outlets.

Shareholders received two of three special dividends, in addition to ordinary dividends, which will total £223m, in the first half of the year. A further £105m has been returned in share buybacks.

Next forecasts it will grow by 10 percent in the third quarter and 4 percent in the final quarter of this year.

It said its fourth quarter estimate may look ‘unambitious’ but argued it was up against very strong comparatives from last year.

While Next chief executive Lord Wolfson highlighted the group’s strategic progress, he admitted ‘external factors’ had supported its continued growth.

The improving economy, continued low interest rates, better access to credit and ‘much better summer weather’ had contributed to its sales performance.

He added: ‘We remain mindful that some of these factors are likely to be less favourable next year and this year’s fine summer weather could present tough comparatives next year, when interest rates are also expected to rise.’

The retailer expects 2014/15 profits to reach between £775m and £815m. Analysts expect M&S to see £663m profit in the same period.

Commenting on the results, Investec said Next had seen a ‘stellar’ performance against ‘lofty expectations’.

While its forcast remains unchanged, analysts did note caution ‘as the business laps a better trading environment, low interest rates and appetite for consumer credit in 2015’.

Next is set to add to its already-strong presence in Yorkshire with its £10m home and garden store in Sheffield, after defeating council opposition, and a unit in Bradford’s Westfield.