Cautious Next chief warns of more pain on the high street

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The Independent Online

The chief executive of Next warned yesterday the high street would remain tough for at least six more months, as the retailer unveiled a drop in underlying sales.

The chief executive of Next warned yesterday the high street would remain tough for at least six more months, as the retailer unveiled a drop in underlying sales.

Simon Wolfson said: "We were very cautious about spring/summer, but not as cautious as our trading figures." He said the retailer would use its purchasing power to maintain profit margins and improve the quality of its goods rather than cut prices. Like-for-like sales across the Next estate have fallen 3.5 per cent during the past seven weeks. Excluding 54 affected by openings, underlying sales at the remaining 279 stores fell 0.9 per cent.

Mr Wolfson, who predicted six months ago that retailers would start to find life more difficult, said he was planning for "negative headline" like-for-like sales. "We remain cautious going into autumn/winter. We are not planning for the underlying environment to improve for at least six months," he added. "There won't be a dramatic drop, but there will be an easing of growth... The interest rate rises have definitely had the desired effect on the consumer."

Despite his downbeat comments, the City took heart from Next's decision to step up its opening programme, and shares in the group rose 19p to 1,599p.

The group will open about 50 stores, or 800,000 square feet, this year, including its biggest store in the Manchester Arndale centre, which will be more than 80,000 square feet.

Signalling that Next did not plan to take on its biggest rival, Marks & Spencer, in a head-to-head price war, Mr Wolfson said the group intended to be "more conservative about value". Up to now, it has reinvested any benefit it gets from better buying in lower prices. The company intends to invest more in high-quality, embellished garments that cost slightly more, rather than concentrate on cheap-and-cheerful basics.

"Fashion is moving towards the middle ground. It's more about improving quality at the same price than the same quality at a lower price," Mr Wolfson said.

Although he took great care not to mention his rivals by name, Mr Wolfson said the company had "planned on the basis that competition is going to get tougher". Stuart Rose, the chief executive of M&S, has invested heavily in lowering the cost of shopping at Marks, in an attempt to woo back customers who have defected to the likes of Next.

At Next, the recent sales shortfall did not detract from a strong year, in which pre-tax profits rose 18.1 per cent to £422.9m. Profit from its directory arm rose 16 per cent to £89.5m.

The group is taking control of its third-party call centre operations in India but does not plan to close either of its two UK call centres.

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