Next in bleak trade update

NEXT yesterday gave a grim view of the consumer outlook while warning that its prices will be hiked to reflect the surging cost of cotton.

The retailer’s spring and summer collection will see average prices rise by six per cent.

Next reported a nine per cent rise in pre-tax profits to £551m in the year ending January. Cost savings boosted the figures as the chain suffered a four per cent fall in same-store retail sales.

Next forecast profit for the new financial year to be between £520m and £570m, in line with current market expectations.

Chief executive Simon Wolfson said: “Retailing will feel like walking up the down escalator – we will have to work hard to stand still. Increases in VAT, cotton prices and labour rates in many of the countries in which we source means the price of our products are rising at a time when our customers are experiencing increased demands on their income.”

Sales at Next’s retail division fell by 2.3 per cent to £2.2bn, but revenues at Next Directory, the home shopping catalogue and website, rose by 7.1 per cent to £935.5m. Next Directory now accounts for 27 per cent of total turnover and 40 per cent of group profits. Despite Next’s warning over cautious consumers, analysts gave a positive reaction to the results and the company’s share price jumped four per cent to 2,043p.

Verdict retail analyst Maureen Hinton said: “Its strategy is to give its investors a good return rather than going for constant growth in revenue. This is aided by its control of costs.”