Next reports better than expected half year profits

Next has reported a 7.1pc rise in pre-tax profits after sales of full-price goods beat the retailer’s own expectations.

The retailer, often seen as a bellwether of the high street, posted £347.1m pre-tax profits for the first half of the year.

Total group sales were 2.7pc higher at £1.9bn, compared with £1.86bn the previous year.

Next said its total retail sales edged up 0.2pc to £1.08bn during the half year while margins had improved thanks to productivity initiatives.

Total sales in its Directory division grew by 8.2pc to £767m in the first half, with profits growing by 7pc to £184.1m, helped by full-price sales.

Its Label unit, which sells other third-party brands through a new catalogue, said that total sales had lifted by 25pc to £145m in the past six months although it was reducing its estimates for full-year sales growth in the division from 30pc to 20pc after admitting that its initial plan was “too ambitious”.

The retailer said that the costs of implementing the Government’s living wage next year would be £2m but estimates the cost of further rises to 2020 will be £27m.

However, in a detailed analysis, Next said that of the £27m only £11m would be those who were entitled to the living wage, the remaining £16m would be the “knock-on effect” of increasing the wages for supervisors, junior managers and other skilled roles.

As a result, it said it would need to raise prices by 1pc over four years, which was "unlikely to have a material effect on the trading performance of the business". Adding in wage inflation of 4.5pc across all roles, it estimated prices may rise by 6pc by 2020.

The retailer said that it expected sales in the second half of the year to be between 3.5pc and 7.5pc higher while group full-year pre-tax profits are forecast to be between £805m and £845m.

Next said that it would pay an interim dividend of 53p a share, a 6pc increase on last year.

Source : Ashley Armstrong - The Telegraph
www.telegraph.co.uk/finance/newsbysector/retailandconsumer/11855254/Next-beats-profit-forecasts-as-it-counts-cost-of-wage-increases.html