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Next warns of "double challenge" as profits fall 7%

Next saw like-for-like sales fall 6.5% and profits in its core business fall by 7% to £446.4 million for the year ended January 2009.

Total retail sales dipped 2.5% to £2.19billion. Profit from retail fell 9.7% over the year but gross margin was up 1.4%. Sales at Next Directory rose 2.1% over the period, slightly ahead of company forecasts for growth of between 0%and 2%. But Next Directory profit fell 4.1% against the previous year.

Next said it anticipated negative like-for-like sales of between -6% and -9% for the year ahead, with the first half being particularly difficult. It said it was less cautious about Next Directory and that sales would be between 0%and 2% higher this year.

“2009 presents a double challenge. Weakness in the general economy means we must plan for a fall in like-for-like sales for the full year. In addition, the weakness of Sterling will put strong upward pressure on cost prices”

Simon Wolfson, chief executive, Next

Next chief executive Simon Wolfson said: “2009 presents a double challenge. Weakness in the general economy means we must plan for a fall in like-for-like sales for the full year. In addition, the weakness of Sterling will put strong upward pressure on cost prices…despite the challenges, we still plan to deliver healthy net margins of more than 10%, generate over £100m of net cash and achieve profits in line with current market consensus.”

Next said it planned to negotiate with its suppliers to absorb some of the impact of the weak sterling on the second half of the year. it said it had bought the dollar at an average price of Story text.50 to the pound versus Story text.98 last year and added that both selling prices and gross margins would be adversely affected.

The company said it remained committed to its policy of not discounting outside of its main Sale periods regardless of promotional activity on the high street.

Separately Next said it planned to open nines stores for its Lipsy brand, which it bought last September. Next said that it also planned to broaden Lipsy’s range and enhance its internet and home delivery capabilities. Lipsy made a £1m loss before amortisation in the period but Next said it expected it to achieve a small profit this year.

Wolfson added: “The outlook for the consumer economy remains challenging and, as we have said before, the first half will be particularly tough. National earnings will be hit by increasing unemployment. For those in employment, we anticipate there will be less opportunity for overtime and bonus payments. In addition, further falls in property prices are likely to undermine confidence.”

 

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