UK fashion retailers are enjoying a stronger sales period of late, with the wet weather and chilly temperatures encouraging consumers to spend on winter clothing still found on the sales rails of many stores. Combined with the increase in sales over the past three quarters, many are now able to post more positive annual results than have been seen since before the recession caused severe problems on the High Street.
One retailer in this position is Next, which this week revealed a 12 per cent increase in annual profits to £695 million. Furthermore, the year to the end of January saw a 5.4 per cent growth in sales, giving the retailer a total sales amount of £3.7 billion.
As with the majority of High Street retailers, investment into its online offer proved to be the cornerstone of this success, with online and catalogue business Next Directory growing by 12 per cent. However, Next defied the trend of falling High Street and shopping centre sales by posting a 1.7 per cent increase in sales made through its network of stores.
Chairman of the board, John Barton, called 2013 a “great year” for the retailer, while chief executive Lord Wolfson remains cautiously optimistic that 2014 will bring even stronger results as “modest improvement” in the consumer economy continues to build in momentum. However, he remains concerned about the sustainability of the current recovery as inflation remains higher than real wage growth.
“Conditions are likely to remain far from buoyant and there are real risks to the sustainability of the current recovery,” he says.
“If anything has been learnt from the last ten years, it is that credit cannot continue to grow faster than wages forever.
“Until we see significant increase in the supply side of the economy (profitable investment and improved productivity), we cannot bank on a return to sustained growth.”
As a result of the annual report, Next has increased its forecasts for the coming year from a projected sales growth of 4 per cent to 8 per cent. Furthermore, it predicts that profits in its 2014-2015 financial year will increase to somewhere around £770 million – in part due to the gradual drop in inflation and the continued strengthening of consumer confidence.
The successful year has meant that, for the first time in history, Next can expect its annual profits to exceed those of Marks & Spencer. Although the latter’s results are not due to be released until summer, industry analysts predict that pre-tax profits at Marks & Spencer will amount to around £628 million, making Next the clear victor by more than £50 million should that be the case.
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