Next first-half profits jump as it cuts markdown sales

Total sales in the half edged up 2.2% to £1.68bn, at the mid-point of its guidance, however operating profits increased 7.2%, at the top end of expectations, as it put less product into its famous Sale.

Full-price sales increased 3.9% and it went into Sale with 18% less stock last year. Operating margins improved as a result of better full-price sales and lower unprofitable markdown sales.

Sales growth was driven by a combination of new selling space and increased online sales.

Next Directory sales, which are mostly online, jumped 8.3% to £597.6m in the half, while new space added 1.8% to total sales.

Next chief executive Lord Wolfson said: “The group has made good progress in the first half, delivering profits at the upper end of our expectations.  Looking ahead the economy looks set to improve moderately, albeit at a slow pace and with the risk that credit easing may not translate into growth in real earnings. 

“We remain confident that we can deliver growth in sales, profits and earnings per share for the full year.”

The retailer has identified an opportunity to sell more transitional stock in early spring and autumn to counteract sales volatility because of the weather.

Sales at Next were “particularly strong” in July when the weather became warmer. However, during August, when the retailer had sold out of summer stock and introduced autumn ranges, the weather worked against it.