Next Directory sales hit £1bn as profits rise 16%

Retailer's results to show online business netted £257m last year
  • @Thompj

Next, the fashion and homewares giant, will this week reveal that sales at its online and catalogue business have smashed through the £1bn barrier for the first time.

As well as passing this milestone, the group's 25-year-old Next Directory is also set to deliver a 16 per cent rise in operating profit to £257m over the year to 28 January. This means the FTSE 100 company's catalogue unit made more money than the John Lewis Partnership's eponymous department store and nearly as much as the JLP-owned grocery chain, Waitrose, over the same period.

When Next's chief executive Lord Wolfson unveils the full-year results on Thursday, his views on the health of the high street will be scrutinised for any signals on when the consumer downturn will end.

In January, he described Next's festive retail trading performance as "disappointing", adding that it was "hard to judge to what extent warm winter weather and higher levels of competitor discounting masked, the deeper, longer lasting, economic benefits".

The retailer is expected to deliver a 3 per cent rise in group pre-tax profits to about £565m, reflecting its tight control on costs and the barnstorming performance of the directory business.

Next Directory is forecast to post a 16 per cent rise in sales to £1.09bn, accounting for a third of the chain's total revenues of £3.26bn, according to Credit Suisse.

Compared to the £257m made by the directory last year, John Lewis posted operating profit of £157.9m and Waitrose's came in at £260.6m over the 12 months to 28 January.

Philip Dorgan, an analyst at Panmure Gordon, said that Next's international online sales are also growing quickly, and he had pencilled in revenues of £32m in 2011-12. The retailer delivers products ordered online to 49 countries, including Japan, Australia, Turkey and Russia.

Next Directory was launched in 1987 by George Davies, the then chief executive of Next, who later went on to launch the brands George at Asda and Marks and Spencer's Per Una.

The online business, which has benefited from Next providing next-day delivery on orders placed before 9pm, has expanded its offer hugely over the years to sell general merchandise products, from fitted kitchens and cookers to treadmills.

However, the picture has not been so rosy at Next's 500-plus stores in the UK and the Republic of Ireland. Total sales in Next's shops are set to fall by 2.2 per cent to about £2.17bn over the year, reflecting falling like-for-like revenues, as consumers rein in their spending.

Elsewhere on the high street, Kingfisher, the DIY group that owns B&Q and has operations in eight countries, is forecast to unveil an 18 per cent rise in pre-tax profits to £801m for the year to 28 January.

Ian Cheshire, who became chief executive in January 2008, is in line to receive about £6.7m – based on Friday's closing share price – after Kingfisher surpassed its performance share plan's two main targets relating to earnings per share and total shareholder return over the past four years.