Directory carries Next while retail earnings slump

High street fashion stalwart Next showed sales growth across the business in its half-year results on Thursday, but earnings were still facing an uphill battle in its retail division.

The FTSE 100 retailer posted sales growth of 0.1% in retail for the six months to July to £1.084bn, with directory sales rising 7.1% to £821.2m and total group sales increasing 2.6% to £1.96bn.

Divisional profit at Next retail slipped by 16.8% for the period, however, to £133.9m, though directory managed a 10.9% increase to £204.2m, with group operating profit down 0.4% to £360.5m.

Profit before tax was up 1.5% at £342.1m, with earnings per share adding 0.8% to 188.6p.

“As expected, it has been a challenging year so far, with economic and cyclical factors working against us, and it looks set to remain that way until mid-October at the earliest,” said Next chief executive Lord Wolfson.

“We remain clear about where we need to focus our energies and continue to work on the priorities we set out at the beginning of the year.”

Lord Wolfson said the company will continue its efforts to improve buying processes, pushing the boundaries of what it can achieve in terms of design and quality.

It will also upgrade the UK directory business, developing new ways of recruiting customers, stimulating sales from existing customers, presenting its website, personalising the offer and improving the delivery service.

He explained that the board will also focus on continuing to develop the directory division's two growth businesses - label and overseas - as well as develop and profitably expand the UK retail store network, and control costs through innovation.

“These objectives all relate to improving how our customers perceive Next.

“We believe that if we stick to our priorities then, however difficult the current year may prove to be, the company will emerge well placed to grow when trading conditions become more benign,” Lord Wolfson added.