REPORT_ For the first half of the year Next sales were 2.2 percent ahead of last year. Pre-tax earnings per share were up 14 percent. Retail sales were down 0.9 percent on last year. New space added 2.7 percent to retail sales. Retail operating margins improved by 0.2 percent.
Operating profits were up 7.2 percent. The difference between profit and sales growth is largely explained by the differing performance of Next’s full price business and markdown sales. Next Brand full price sales were up 3.9 percent. The company went into sale with 18 percent less stock than last year and markdown sales were consequently 13 percent down on last year. The combined effect of better full price sales, lower unprofitable markdown sales and good cost control meant that operating margins improved in both retail and directory.
New store profitability is forecast to be 22 percent. Payback on net capital invested is expected to be 19 months. Both figures are comfortably within company investment hurdles of 15 percent store profitability and 24 months payback on capital. Brand sales guidance for the full year is 1.5 to 3.5 percent.