Next chief executive Lord Wolfson has warned that global powerhouse China offers limited opportunities for the fashion retailer and others like it.
His comments contrast with other retail giants such as Argos, Asos and Ted Baker, which have pinpointed the region for future growth due to the country’s rising middle classes. Asos boss Nick Robertson is spending two years launching a country-specific website in China, which has a growing population of more than 1.3 billion.
Wolfson said his experience in the country, where it operates five stores, two of which are company-owned, showed it was not the promised land that some western retailers hoped.
He said: “China’s an enormous place but the average wages are a quarter of what they are in the UK. Our prices are not going to be any cheaper so the number of people who can afford Next clothing there are limited. We’re cautious on the opportunity.”
Despite this, Wolfson is launching a Chinese website this year to capitalise on growing online and international sales.
Its soaring Directory sales, mostly from online, helped group underlying pre-tax profit from continuing business jump 5% to £570.3m in its full year to January 28. Directory sales surged 16.4% to £1.08bn.
Total store sales fell 1.4% to £2.2bn in the face of “anaemic” consumer demand.
Wolfson said he will be “ruthlessly pruning” the Next portfolio over the year, although overall store numbers will remain relatively static.