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Next reports strong first half despite like-for-like decline

Next has reported a “better than expected” start to the year despite a decline in its like-for-like sales.

The high street retailer recorded a 4.8% increase in sales to £1.6bn for the half year to the end of July while pre-tax profits were up 10.2% to £251m.

Like-for-like for sales in the period were down £18m on the same period last year and are expected to be down £39m at full-year.

However Next said that growth in its online business, the addition of profitable new space and good cost control more than offset the negative impact of the decline in like-for-like sales.

Profitable new space added £14m in sales while the growth in online sales added a further £26m.

Overall sales in the period in Next’s Directory division, which includes its online business, rose 13.3% to £551m while sales in its retail business were up 0.2% to just over £1bn.

Next said it had worked hard to control costs in the period and had achieved an improvement to gross margin, which exceeded cost increases by £1m.

When it reported its first half sales figure at the start of August, Next boss Simon Wolfson told Drapers that the retailer would look to drive online growth by offering improved delivery services to customers.

In its statement today Next confirmed plans to improve delivery services with options of same day, evening, Sunday and next day to store deliveries. In addition to these options the retailer is also extending its cut-off for next day delivery to 10pm.

Any new store space opened by the retailer must make a profit contribution of 15% and pay back all net capital invested within two years.  

However recent trading meant management was cautious about the economic outlook.

Wolfson said: “Disappointing sales in an unusual August and early September reinforce the wisdom of this conservative approach.

“We are on track to meet market expectations and maintain the full-year financial guidance given in our August trading statement, with sales, profits and earnings per share all moving forward on last year.”

Wolfson went on to call for a relaxation on Sunday trading laws in the run up to Christmas when shoppers are pressed for time.

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