Despite the “challenging” retail market and falling first-half sales and profits, Next is in a “much more comfortable” position than it was six months ago, chief executive Simon Wolfson has said.
The retailer announced that group profit before tax was down 9.5% for the six months to the end of July, while full price sales dropped by 1.2% and total sales including markdowns were down 2.3% on last year.
However, Wolfson insisted improvements to its product ranges have been “encouraging” and will buoy sales in the second half of the retailer’s financial year.
“We weren’t happy with the product at the beginning of the year,” he said. “We said it would be September before we saw an improvement and we are much happier and more comfortable with the ranges than we were six months ago. Not to say they can’t be improved further, but we’re in a better place.”
The business now expects full-price sales for the second half to be in the range of -2.8% to +3.8% and has upgraded upgrade its full-year full-price sales range to -2.0% to +1.5%, up from -3.5% to +0.5%.
Despite the upgrade, Wolfson remained cautious. Asked if Next was building momentum, he said: “We nudged our profit guidance up by 1%, we are not in momentum territory. However, I think we have reached the bottom of a number of adverse trends. The shift in spend from clothing into other areas is still there but it isn’t accelerating. It isn’t getting better but it isn’t getting any worse.”
During the period, store sales fell by 8% compared with 2016. Within those, full-price sales were down 8%. Wolfson said the business is focusing on improving in-store experiences to bolster footfall.
The firm’s store in the Arndale shopping centre in Manchester is going to be a test bed for new experiential concessions, including a prosecco bar and a hairdressers. If successful, the business will roll these out to other stores.
Next has also agreed to a 50:50 joint venture with Gino D’Acampo Restaurants and plan to open two restaurants under the Gino D’Acampo brand. One of these restaurants will be in Arndale, the other will be adjacent to the retailer’s out of town store in Hull. If the trials are successful Next has identified a further eight stores where a restaurant could be added.
“We are in experimental mode. There are lots of things we are looking at doing over the next five years to make our stores more relevant and more fun”, Wolfson explained.
“The nature of Next is to take small risks not big ones. We will trial some things and if they are successful we will roll them out. We are always looking at what our customers want, and expectations are evolving. It’s our job to follow them as closely as we can.”
Online sales at the business, including Next, Next Label, Lipsy and Lipsy & Co, increased by 6% during the half, including full-price sales growth of 7%.
Earlier this month it was announced that Lipsy will close its standalone website in January and customers visiting the Lipsy site will be redirected to Next, which acquired the brand in 2008.
During the half, sales from Lipsy.co.uk totalled £5.5m, up from £4.1m in 2016. Lipsy sales through Next’s online business totalled £31m, up from £19.9m for the same period in 2016.
Wolfson said the decision to close Lipsy.co.uk was to cut costs: “It didn’t make sense to have two websites, two different systems and two servers. We will give more control to the Lipsy team on the Lipsy part of the Next website next year.”