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Next puts the case for stores, even though online is more profitable

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Next today reported rising and more profitable online sales, which helped to boost its overall sales for the first half of its financial year. But the retailer’s management put the case for new stores as well as online expansion in its half-year results, emphasising the multichannel benefits.

Next today said that sales rose to £1.7bn in the six months to July 2013, 2.2% up compared to the same time last year. Pre-tax profits grew by 8.2% to £271.8m.

Online, directory, sales grew to £597.6m, 8.3% up on last year, with a significant (2.9%) contribution from international. The company now predicts full-year international online sales will hit £90m. It also now has 17 fully-owned international stores.

Store-based retail sales were down by 0.9% at £1bn. Directory sales were lower but delivered more profit than retail stores, delivering £156.1m in profits, 13.4% higher than at the same time last year, compared to £124.3m for retail profits, up by 1.3% on the previous year.

Stores, said today’s statement, remain important to the brand. Not only is new space more profitable than existing space, it’s also used by online customers, with 38% of online orders now collected from stores and 66% of directory returns made through the store network. It’s also, said Next, a good time to invest in stores, with good sites and good terms available. Next opened six new stores and closed five old ones in the first half, taking its total store numbers to 541 and adding 145,000 sq ft to its estate. It now plans to continue opening new stores, opening 1.4m sq ft of space in the next five years, more than half in its large format of fashion, home and garden stores.

Next also said that the consumer credit squeeze might be over, and that the housing market was picking up, but it said these two factors were unlikely to mean a long-term recovery in retail sales because real earnings are still falling, and expected to do so for at least another year. “For the moment,” said chief executive Lord Wolfson , “the limited consumer recovery has been entirely credit-led. We believe that talk of a full-blown reocovery is premature. We expect the consumer environment to remain subdued until such time as real earnings begin to grow and that looks like it will take at least a year.”

It predicted that full-year sales would grow by 1.5% and 3.5%, and that pre-tax profits would grow by between 2.2% and 8.6%, to between £635m and £675m.

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