Next to take risks in new ranges despite spending slowdown

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Next has struck a note of caution about the retail environment but said its performance was improving despite the slowdown in consumer spending.

The clothing retailer blamed recent interest rates hikes and a crackdown on internet fraud launched earlier this year for a slowdown at its Next Directory catalogue in recent weeks and said it remained aware that the full effect of rate rises "had not yet filtered through to customers".

But the company remained upbeat as it gave further details in its strategy to "put the magic back into Next" by taking greater risks in its ranges.

Next is set to launch its first major television advertising campaign this week to showcase its revamped collection, which will feature KT Tunstall's "Suddenly I See" as the background music. "It will be a heavyweight campaign," said chief executive Simon Wolfson, adding that the company was spending £18m more than usual on advertising this year, including £2m more on its window displays in the run-up to Christmas.

Analysts said that move means Next is feeling more confident about its ranges, which critics say have failed keep pace with its high-street rivals in recent years.

Shares in the company rose 79p to 1940p yesterday as the City welcomed better-than-expected first-half figures. Pre-tax profits in the six months to July rose 11 per cent to £198.2m, due to cost-cutting and a stellar performance from the Directory division where profits were ahead 24 per cent, while group revenues rose 1.9 per cent to £1.5bn.

Mr Wolfson said: "In a time when the retail environment is getting worse, our performance is getting better and we expect modest improvements on that in the second half."

In recent weeks, Next has launched a Signature range, a higher-priced range, which it said has been selling well but only counts for 3 per cent of in-store items at present. "There is definitely an increased interest in quality," said Mr Wolfson. "We can observe this in the mix of product we are selling."

Nick Bubb, at Pali International, said: "The fact is that Next are cautious about the economy and the pressures on the consumer, but all they are doing on fresher clothing ranges, improved marketing and more exciting shop refurbs is convincing and market share looks in good shape."