Next posts 10% rise in pre-tax profit but reveals sales lull

City Editor

Friday 14 September 2012

LORD Simon Wolfson, chief executive of clothing retailer Next said he will not know until next month whether a sales lull in August and early September was a blip, as spooked investors sent its shares down 7%.

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TIM SHARP

Next, which has 38 stores in Scotland, posted a 10.2% rise in pre-tax profit to £251 million for the six months to July 28, on revenue of £1.6 billion, some 4.8% ahead of the previous year.

This was towards the top end of analysts' expectations, but Next's revelation that subsequently August and September had been "unusually quiet" was enough to see its shares close down 259p at £33.20p.Lord Wolfson said: "The truth is we do not know whether it is a general slowdown in the economy or it is all the unusual things going on in August whether Olympics or weather or more people travelling overseas."It may be a combination of these. We won't be sure until October."Next, the official clothing and homeware supplier to the Games, had fared better than many other retailers during the downturn as falling in-store sales have been offset by rising online business and the opening of new space.In the period, declining like-for-like sales knocked £18m off earnings in the six month period, but £14m was added by new space and £26m by additional turnover in Next Directory.Lord Wolfson said: "Real wages are not moving backwards as much as they were. But they are still moving backwards."What this means, I think, is that trade is going to be subdued over the next six months. It is not a disaster, not Armageddon."I think we can see some stores going backwards which at Next we will offset by growing online sales."He said that in Scotland, as in the rest of the UK, trading conditions varied, with the hardest hit areas those with high levels of public sector employment.There had been a particular downturn in sales of its women's and children's clothes but a pick-up in homeware sales.Lord Wolfson said: "The reality is the consumer environment is becoming more and more volatile."He added: "What we are finding is that the good weeks we have are better than we have ever seen before and the worst weeks are worse."Consumers are buying closer and closer to the event they need the product for."He said he did not expect conditions to improve until next year.The company is preparing to expand its online offering by giving customers in its stores the chance to arrange for Sunday, evening and same-day delivery. This will cost £3 but the company still it expects it to cost it £1.5m.

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Next posts 10% rise in pre-tax profit but reveals sales lull

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