28th Sep 2018
Next has reported better-than-expected sales after a buoyant trading period in the first six months of the year.
The company raised its profit forecast for the whole year to £727m, up by £10m on previous predictions.
In the first six months of the year, sales in stores fell by 6.9% to £925.1m, however this was more than offset by an increase in online growth, with sales jumping 16.8% to £892.3m. Total group sales were up 3.8% to £1.98bn as a result.
As a result of the fall in store sales – Next sold more goods online than in stores for the first time during the six-month period – the retailer has slated 22 stores for closure this year, up from 14 last year. A further 25 are being kept on without a lease, meaning that they could be closed at any time.
Sofie Willmott of GlobalData said that Next’s “more agile” retail estate placed it in a better position in the current market compared to many of its rivals, as customers increasingly shift towards online shopping.
Despite this, the retailer warned that the UK retail market remains volatile. The recent struggles of rival high street companies including House of Fraser have been well-documented, while John Lewis recently announced that its profits had fallen by 99% in the first half of the year.
Next Chief Executive Lord Wolfson said: “When we issued our August Trading Statement we believed that there was a high risk that the sales gained in July would be offset by losses in August. As it turned out, we did not experience any material loss of sales in August or early September.”
However, he warned that the retail sector is set for continued struggles: “The UK retail market remains volatile, subject to powerful structural and cyclical changes. As expected, sales in our stores (which now account for just under half of our turnover) continue to be challenging.”
Brexit-related risks include higher tariffs on imported goods, as well as queues and delays at UK and EU ports due to increased customer declarations.
Next said that it was preparing for a scenario where the UK leaves the EU in March 2019 without a transition period or a free trade agreement, however the retailer downplayed the impact of a no-deal outcome on its business.