Next and B&Q eye expansion after surprise surge in profits
Both chains also raise dividends for shareholders
Friday 26 March 2010
Two of the UK's biggest retailers posted a surge in 2009 profits yesterday, but both warned of a tough and uncertain consumer environment ahead.
Next, the fashion and homewares retailer, posted an 18 per cent rise in pre-tax profits to £505m for the year to January 2010 and signalled an acceleration in the rollout of its standalone Next Home stores.
Meanwhile, the global DIY retail group Kingfisher, which owns B&Q, crafted a 48.6 per cent jump in adjusted profits to £547m and the first growth in its dividend for five years.
Next and Kingfisher gained from better-than-expected trading conditions in the retail sector last year, but both also boosted their bottom line by keeping a tight control on costs and stock, and improving the product offer.
Simon Wolfson, the chief executive of Next, which upgraded its profit forecasts by a record five times over the year, said: "Things have turned out very differently to how we expected at the start of the year." Group sales at Next jumped by 10.8 per cent to £3.41bn over the year. The retailer, which has 517 stores, proposed a final dividend of 47p, lifting the growth in its annual payment by 20 per cent.
Mr Wolfson also said that of the 20 new stores Next will open this financial year, 12 will be standalone home stores on retail parks. He said: "The home stores have performed 43 per cent ahead of expectations. We have now reached a critical mass and people now see us as a one-stop destination where they can get products, such as sofas and cutlery."
Over the 53 weeks, retail sales at Next rose by 3.5 per cent to £2.27bn.
Mr Wolfson said he thought it was "unlikely" there would be a double-dip recession in the UK, but warned: "The consumer environment is going to be tough for sometime until the [public sector] deficit is sorted out."
In the DIY sector, Kingfisher, which has operations in countries including Poland, France and China, delivered a 4.8 per cent uplift in total sales to £10.5bn for the year to 30 January 2010. The UK's biggest DIY chain B&Q, with 330 stores, posted a 79.4 per cent uplift in retail profits to £195m.
Ian Cheshire, the group chief executive of Kingfisher, said it would roll out its Trade Point business – a dedicated area in stores serving bonafide trade customers – to 118 stores by the late summer.
Targeting the £20bn UK trade market, Trade Point will provide an in-store catalogue offering 8,000 items held in a warehouse behind the counter.
Kingfisher also plans to pilot eight new shop-in-shops, including areas for storage products, home cleaning, garage workshops and eco-friendly items.
But Mr Cheshire said Kingfisher plans for a "difficult market" this year.
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