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Next raises profit expectations following strong growth, online and off

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Next today raised its profit expectations on the back of strong trading, especially online.

Sales at the fashion to homewares retailer rose by 10.7% in the first half of its financial year, compared to the same time last year, the company said in a trading statement today. Retail sales as a whole rose by 7.5% in the 26 weeks to July 26 but Next Directory sales, predominantly made online, grew by 16.2%. Online sales were strongest in the second quarter of the year, with growth of 18.8% lifted from first-quarter growth of 13.7%.

First-half sales were better than expected, leading the retailer to raise its full-year profit expectations by £25m, to between 7% (£775m) and 10% (£815m) growth in the year to January 2015, up from the previously expected range of between 5.5% and 9.5%. The new forecast represents profits growth of between 11% and 17% for the year.

Commenting on the results, Julie Palmer, retail expert at Begbies Traynor, said the year had started well. “The results indicate that the clothing and homewares retailer has mastered how to capture consumers in a changing retail environment. Its online operation, which has continued to grow strongly, has been key to Next’s success, outperforming many of its competitors.”

But, she said, as consumer spending and the housing market are expected to soften, “a lot will be riding on the success of the expansion of its home proposition and on its strategy towards the build-up to the lucrative Christmas period, particularly in the face of Marks & Spencer fixing initial issues with its new online offering.”

Paul Doble, ecommerce expert at logistics network operator DX, said: “Whilst the wider high street is still adapting to changing consumer habits, Next has proved successful through its strong online and catalogue offering – demonstrating its understanding of the importance of the current ecommerce arena and its ability to adapt.

“Our own experience has shown that there is immense potential for growth available through the diversification of the online channels. Next has stepped up to this challenge through its Next Directory service, which saw a 16.2% increase in sales in the first quarter. This online and physical catalogue is supported by one of the industry’s most ambitious delivery services, offering same day delivery, evening delivery, next day delivery for goods ordered by 10pm and Sunday deliveries.”

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