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High street retailer Next on Wednesday reported results for the first half year ending July 2008. Anticipating a difficult year, Next set itself four key objectives: to set realistic budgets, control stock, control costs, and continue to invest in the Brand. During the first half the company came within the guidance for sales set out in March. Retail full price like for likes were down 6%, and stock going into the end of season Sale across Retail and Directory was down 20% as a result of both realistic budgets and much tighter stock control. Group profit for the half year ending July 2008 met both internal forecasts and market expectations. Group operating profit declined by -6.9% to £198m. Next Brand profit was in line with last year. However, Ventura and Next Sourcing both experienced significant declines. Next added 105,000 square feet of trading space in the first half, increasing our portfolio to 506 stores. The payback on the net capital invested in new space is forecast to be 16 months. Retail profit declined by -4.4% in the first half, with net operating margin down just 0.1%. Markdown costs reduced by 1.8% of sales. Next anticipates that many of the cost pressures of the first half will continue (rents, rates, depreciation) and there will be much less scope for improving the achieved gross margin.
Next Sales Directory was at the top end of the Group’s expectations, up 2.2%. Sales growth was driven by an increase of 1.5% in the average number of active customers and an increase of 17.2% in pages. The majority of the additional pages went to new and developing product areas. The Company stated that alothough conditions are set to remain tough, its believes the Group is well prepared for the current environment with sound financing and good cash flows. The Next Directory continues to fare well and also provides the Group with opportunities to expand into new markets. Our internal forecast for full year profit before tax remains in line with market consensus. The majority of external forecasts are currently in the range of £400m to £440m.
Image: Next Directory
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