Next delivers 7.1% boost to online sales, but overall profits dip
Next today said international growth and sales of third-party brands had helped its predominantly online Directory business to grow by 7.1% during the first half of its financial year.
The fashion-to-homewares retailer, a Leading retailer in IRUK Top500
research, said full-price sales in the channel grew by 5.5%. Much of the UK growth, it said, was driven by its Label retail brand where it sells products from other brands – Next full price sales were up by 0.1%. Its overseas Directory business, meanwhile, grew by 20.7% after a year in which Next opened distribution hubs in Russia, Germany and China. The first two, it said, were working well, while it had moved its Chinese hub out of a free trade zone to a new operation in mainland China that was also now working well. But it warned that sales from overseas franchise partners had fallen by 12%, partly as a result of increased competition and partly in the face of competition from its own online website as its reach extends overseas.
The growth in Directory sales, to £821.2m in the six months to July 2016, remains well ahead of store sales, which at £1.1bn were up by 0.1% on the same time last year. Overall Next group sales rose by 2.6% to £1.9bn, with revenue of £1.94bn 2.6% ahead of the £1.89bn reported last year.
But while Directory profits of £204.2m were up by 10.9%, profits from retail stores of £133.9m were 16.8% down on last time, and overall pre-tax profits came in at £342.1m, down by 1.5% on last time.
Focusing on ongoing project to improve the Directory business, the retailer said that a "meaningful impact on sales" had been felt from projects to improve stock availability – which saw the proportion of items available for immediate dispatch rise from 66% to 71%, the launch of its new mobile site – which saw the mobile conversion rate rise by 16%, from 4.9% to 5.7%, upgrades to its apps – which account for 7% of Directory turnover, but enjoy conversion rates of about 10%, and the roll-out of online marketing campaigns.
It will continue to improve its mobile website in coming months, while also tackling its biggest challenge, the personalisation of its website. This last programme will be based on a comprehensive customer database, new display software that enables users to get different views of the website, and an understanding of which personalisation techniques are most likely to increase sales as products and ormotions are targeted to the most relevant customers.
It is starting to implement website personalisation programmes over the coming six months. "However," said the retailer in its half-year statement, "we recognise that it will take at least another six months to gain a clear understanding of which personalistion techniques work best for the business. So we do not expect personalisation to have much impact on sales during the current financial year, though it represents a potentially significant opportunity for 2017 and beyond."
Next is set to launch delivery and collection from 5,000 parcel shops in October, while two-hour delivery windows will be introduced towards the end of the year.