High-street retailer Next (LON:NXT) has reported higher revenues, profits, earnings per share and dividends for the half year.
In the six months to July, the group’s revenue grew by 4.8 per cent to £1.64 billion, profit by 10.2 per cent to £251 million, and earnings per share by 18.7 per cent to 118.5p. The firm will also raise its interim dividend by 12.7 per cent to 31p per share.
Lord Wolfson, Next’s chief executive, welcomed the ‘better than expected start to the year’. But he warned that the second half may prove tougher.
‘August and early September sales have been disappointing during what has been an unusually quiet period’, he said. ‘We remain cautious about the economic outlook whilst maintaining full year guidance that our sales, profits and earnings per share will all move forward on last year.’
The company’s strong performance over the half was only possible because higher online sales, store expansion and cost control offset a decline in like-for-like retail sales.
The hike of earnings per share by a fifth, whereas profit only climbed a tenth, was also primarily attributable to a £112 million share buyback scheme. Next has committed to further buybacks worth another £70 million before the end of the year, but noted that this would be ‘subject to market conditions and the prevailing share price’.
Bearing in mind these lower like-for-like sales and the flattering effect of the buybacks, the fashion house gave a downbeat assessment of its short-term prospects.
‘If the economy had a weather forecast the outlook would be overcast – patchy rain for the foreseeable future’, Lord Wolfson commented. ‘In the run up to the credit crunch individuals, businesses and government lived beyond their means. It will take some time to work our way back to affording the lifestyle to which we became accustomed.’
Next’s boss added that while ‘wage increases remain lower than inflation’, consumers’ earnings would ‘continue to modestly decline’, denting their spending power.
The stock market bowed to the pessimism, with Next’s share price tumbling by more than 7 per cent to £33.28 as soon as trading opened.