Next has posted total group sales down -2.2% and pre-tax profits down -9.5% in what the high street giant described as a “difficult” first half, though encouraging trading in the past three months had led it to modestly increase is full year forecast.
Total group sales in the six months to July 2017 were £1.9bn, down -2.2%, (Next Brand full price sales were down -1.2%) while retail sales were down -8.3% to £993.2m and Directory sales were up 5.7% at £868.4m (“Other” sales were largely static at £52.4m).
Retail profits were down -33.1% at £89.5m and Directory profits up 6.3% at £217.1m. Overall profit before tax reached £309.4m, a drop of -9.5%.
However the business said the past three months had been “encouraging” and had given it confidence that its ranges are improving (it had previously admitted to having taken its eye off the ball when it came to core basics) and as such it was upping its guidance for the full year. It now expects the full-year full-price sales range to be -2.0% to +1.5%, which is a marginal improvement on prior guidance, and the mid-point of its profit guidance has now moved up by £7m to £717m.
CEO Lord Simon Wolfson took the opportunity in his commentary to underscore the retailer’s commitment to its retail estate, despite falling sales and profits, partly due to the support role it plays to the online business.
“As the centre of gravity of the clothing market shifts towards the internet, we have taken a long hard look at the future of our Retail business. There are those that believe that retail shops will be more of a liability than an asset in the future; we do not see it that way,” Wolfson said.
“There are two important reasons. Firstly, our store portfolio looks set to remain profitable and strongly cash generative for many years to come. Secondly, our shops are an important part of our online service to the increasing number of customers who collect and return their orders through our stores,” he added.