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Next unveils 15% growth in online sales

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Fashion retailer Next today reported a 15.1% rise in online sales, thanks to what it said was a “general trend towards shopping online.” But despite that trend it emphasised the continuing importance of stores, which it said “enhanced” its online service.

Next also said international online sales had risen much faster than expected and that it planned to trade in Russia, China and Japan in coming months.

The retailer today unveiled first-half results. In the half-year to July 2011, revenues rose by 3.6% to £1.6bn, while pre-tax profits rose by 8.5% to £228m despite the “perfect storm” of higher cost prices, VAT and selling prices 7% up in a difficult consumer economy that Next said retailers had faced this year.

It said it had achieved this through well-stocked fashion ranges, growth in retail and online sales as well as careful balance sheet management. The major growth in revenue came from online, where sales rose by 15.1% to £486.7m and international, where sales rose by 9.2% to £33.6m. Retail sales were down by 1.8% to £1bn. In the UK alone, online sales rose by 10.4%.

Growth in online sales was driven, said Next, “by the general trend towards shopping online”. Next also benefited, it said, thanks to improved delivery services, and most importantly its decision to extend the cut-off time for next day delivery to 9pm.

But despite the move to online shopping and the fall in store-based sales, the company is also opening more shops, with an emphasis on standalone home stores of which six were opened in the first half of the year.

The company said: “There is a legitimate question about the wisdom of acquiring additional retail space at a time when an increasing amount of trade is being conducted online. We believe that Next’s success online is enhanced by its retail presence.

“Directory customers clearly value the integrated delivery and returns facility that we offer in our stores: 13% collect their orders from our stores and more than half of all returns come back through stores. Directory customers can also use their Directory cards to buy goods in our retail stores. Not only do these services help in retaining existing Directory customers, the shopping experience in our stores makes a retail customer more amenable to becoming a new Directory recruit online.”

Looking overseas, Next said international sales were likely to come in at £32m in the full year, compared to £10m last year. The company now sells over the internet in 42 countries, with Germany, America, Eire, Australia and Poland its most important markets. It plans to trade in Russia, Japan and China within the next six months and is also planning to increase the speed of its overseas deliveries as well as offering more local language sites where shoppers can pay in their local currency.

The retailer now believes next year will be less difficult, and that selling prices will not increase further thanks to “the collapse of the cotton price bubble”. “Any recovery in spending is likely to be slow and take a long time, but it seems reasonable to believe that by the second quarter of next year we will begin to see some recovery in the consumer environment,” said chief executive Lord Wolfson.

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