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China presents the “most interesting opportunity” for Next

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Next chief executive Simon Wolfson today said that a move to sell in China had “started well” and represented the “most interesting opportunity” of the 11 new territories that it has begun to sell into over the last six months. They also include Cyprus, Malta, Saudi Arabia and Belarus.

But Lord Wolfson said that trading in China presented “many logistical and administrative challenges,” and cautioned, “we do not expect to generate meaningful sales until we have spent more time learning how best to operate in this territory.”

The update came as Next reported first-half results, and said growing domestic and international sales from its directory, which predominantly sells online – 85% of international directory sales come through the website – were among its strategic priorities for the current financial year. International directory sales contributed 2% to growth in Next brand sales, themselves up by 10.7%, while the UK directory contributed 3.2%. Retail contributed 4.7%.

At home, the company said more than 50% of its online orders were now delivered to its stores. Next said the change had come as it introduced free next-day delivery for orders placed by 10pm. In future, it will extend that deadline to midnight. However, because such orders tend to be smaller, orders that are delivered to stores account for around 30% of Next revenues.

In the year to July 2014, total sales were up at £1.8bn, 10.3% more than at the same time last year. Pre-tax profits reached £324.2m, 19.3% up on last year.

Next Retail sales grew by 7.5% to £1.1bn, with profit up by 22.6% at £152.3m, while Next Directory sales were up by 16.2% at £694.3m, and profit came in at £172.1m.

Lord Wolfson said Next had seen its “strongest sales growth for many years,” during the half-year. But, he warned, “it is important for us to recognise that this performance is, in some part, down to external factors. An improving economy, low interest rates, increasing availability of credit, less general discounting on the high street and much better summer weather have, we believe, all contributed to an improvement in our sales performance.” The housing market had also helped its home business.

But, he warned, some of the factors were likely to be “less favourable next year”. A repeat of this year’s fine summer weather could not be relied on, while interest rates were also likely to rise.

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