Next proves 'resilient' despite rising costs
Retail giant Next has reported a rise in revenue and pre-tax profit for the first half of 2011 despite facing its first concerted rise in cost prices for nearly 20 years. The Leicestershire company said: "In a difficult year Next has proven resilient. In many ways 2011 has presented the perfect storm to the retail economy."
The Enderby business said group revenue for the first half of 2011 was up 3.6 per cent on last year to £1.63bn while pre-tax profit also rose by 8.5 per cent to £228m.
Next said it had continued to grow the business by adding new space with a focus on its new large home store format.
The company said it estimated that net sales from its new space had increased sales by 4 per cent in the first half and that selling had increased by 5.6 per cent overall. The company opened 183,000 sq ft in total, taking its total trading space to 6.3 million sq ft.
Next said it had also grown its Next Directory sales in the UK and overseas.
However the company revealed that increasing costs, combined with rising VAT, meant that its selling prices had risen by about 7 per cent. The retail giant said that in a normal environment price rises would have been soaked up by demand, but it said that spending has been squeezed by inflation in food and fuel, tight control of consumer credit, cuts in government expenditure and broadly stagnant wages.
According to Next, the business remains strongly cash generative and it has continued to buy back shares, which are 18.6 per cent higher than last year. The interim dividend also increased by 10 per cent to 27.5p per share.
Looking ahead to its full year results, Next said it expected sales for the year to be between 2 and 4.5 per cent ahead of 2010. It also expects group profits to be up between 0.4 and 8.7 per cent, with earnings per share rising between 7.5 and 16.4 per cent.
Next also said that early indicators showed that difficulties in the retail sector were likely to ease in 2012. In a statement released this morning, it said: "We have strong evidence that there will be little or no inflation in our own prices and it seems probable that other inflationary pressures will ease."
