Next rejects recession talk as sales leap

Next showed rivals a clean pair of heels yesterday with a sales update that sent the shares soaring and had chief executive Simon Wolfson insisting that figures suggesting the nation is back in recession are plain wrong.

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Lord Wolfson, a Conservative supporter who has been a strong backer of the Government's austerity drive, was able to defy talk that traditional retailers are in crisis and that the Olympics has only exacerbated the situation.

Sales in the half-year to the end of July were up 4.5 per cent, a rise few rivals can beat.

That was better than most City analysts had dared to expect and the shares were the biggest riser in the FTSE 100, up 208p to 3,427p. Next's market value recently passed that of Marks & Spencer, an event that increased pressure on M&S boss Marc Bolland, who critics say is failing to deliver the overhaul needed at the retailer.

Next was yesterday valued at £5.6bn by the stock market, compared with M&S's £5.4bn. Clive Black at Shore Capital said the sales figures show that Next is "a class act" and that the figures represent a "challenging read-across for Mr Bolland & Co".

Mr Black thinks Next's annual profit could now hit £620m, £10m higher than he previously thought.

Lord Wolfson was sanguine about his own figures, noting that most of the sales growth comes from home shopping rather than in-store.

Of the 4.5 per cent rise, 0.2 per cent is in-store, 2.5 per cent comes from new space and 13.3 per cent from the Directory arm. "The two things that are helping are new space and the growth of online," he said.

"Retail sales are flat and underlying same-store sales are still moving backwards. Consumers are still tightening their belts."

But he had words of comfort for the Chancellor, George Osborne, adding his voice to those that think recent figures showing a 0.7 per cent fall in second-quarter GDP cannot be right.

"I don't for one second believe those numbers," he said.

"It is not possible for an economy to fall by 0.7 per cent while employment figures rise. My sense is that the economy is flatlining."

Asked when a true turnaround would begin, he replied: "I don't know, but not this year."

Next also underscored its commitment to its £200m share buyback programme, on which it has spent £112m so far.

James McGregor of shopping consultants Retail Remedy said: "In an extremely challenging retail environment, Next has done the right thing by focusing myopically on its core strengths and core customers, many of whom have grown up with the brand."