Overall revenues for Next plc for the year to end of January 2009 were down 1.7% to £3,272m with profits of £478m, according to its newly announced annual results.
"The current economic climate in the UK is unstable and this brings short term volatility in our sales which, in turn, makes forecasting difficult," says the chairman's statement. "In addition, the weakness of Sterling against the US Dollar and the Euro, our main purchasing currencies, has brought further challenges to our buying teams. Their response has been excellent, working hard with our suppliers to protect our customers from unaffordable price increases and our own margins, as far as possible."
At Next Directory, which includes the company's ecommerce business, sales are proving resilient as the Chief Executive's Review explains:
Directory continues to grow despite the economic environment. We believe the resilience of the Directory is mainly as a result of continued growth in the use of the internet and the continued expansion of new product categories. The provision of credit on Next Directory accounts may also be providing an advantage in the current consumer environment.
Sales were at the top end of our expectations, up +2.1%. Growth was achieved through a 1.9% increase in the average number of active customers and an 8.4% increase in pages. The majority of the additional pages went to new and developing product areas. The internet continues to be very important to the development of the Directory and now accounts for over 60% of our orders. We will continue to enhance our internet functionality in the coming season and we will re-launch the site in a wider format with improved search and display of products.
And the company's recent strategy of maintaining prices is clearly set to continue:
Going forward we believe the increase in promotional activity on the High Street will continue, albeit that more realistic budgeting in the sector may result in less markdown immediately prior to Christmas. Next intends to continue trading at full price at all times, other than at our traditional end of season and mid-season Sales. Any increase in promotional activity must logically involve either the surrender of margin, or the artificial raising of initial prices in order to offer them as a "bargain" at a later date. Whilst some have made a success of this strategy, we do not believe that this would be right for the Next brand.
Next's market position at the top end of the mass market is not the most comfortable place to be during a recession and we have two alternatives. We can make the best of our current position by providing customers with what they expect from Next; namely exciting, beautifully designed, great quality clothing and homeware. Alternatively, we could engineer our product ranges to lower price points at the expense of design and quality. We have decided that we will not devalue our ranges and will maintain our market position. We believe that in the long term this integrity will provide us with a solid platform for growth when the economy recovers.
That is not to say we can afford to be complacent about price. We believe there are opportunities to improve opening price points in some areas, without sacrificing quality and design content.