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Next expands Web site to revive mail order

NEXT, the High Street retailer, is to jump on the electronic commerce bandwagon in an effort to boost the ailing sales of its mail order business.

The company said yesterday it would expand its Internet site - www.next.co.uk - to allow customers to order clothes online by the end of the year. However, Internet shoppers will not be able to browse through products on the Web and will still need a copy of Next Directory, the group's mail- order catalogue.

The finance director, David Keens, said the Web was still too slow to carry a 500-page catalogue. He added that it would be "pretty sad" for customers to sit at their computers for hours browsing virtual clothes.

However David Jones, chief executive, said the online Directory did not herald a major push into e-commerce or interactive television. "It is going to be a slow process for the Internet to replace the phone in the clothing industry."

His comments came after the Directory proved Next's worst performer in 1998, with profits down by 25 per cent to pounds 25.5m. The division, accounting for about 17 per cent of group profits, suffered from increased competition as rivals such as Arcadia and Marks & Spencer increased their presence in the mail order market.

The Directory's sluggish performance and problems with stocks and womenswear ranges in the high street chain in the first half led to a 9.3 per cent slide in 1998 pre-tax profit to pounds 166.9m on sales up by 5 per cent to pounds 1.2bn.

The figures masked a sharp rise in sales and profits in the second half after Next took radical action to correct the problems. Mr Jones said that the company was back on track. "Twelve months ago I was a sad boy, six months ago I was happier and now I am much more relaxed about life," he said.

Mr Jones also quashed recent rumours that the group was to sell Ventura, its call centre business.

The improvement in the latter part of last year continued into the first weeks of 1999, with like-for-like sales in its 327 shops up by 17 per cent on the unusually-poor 1998 figures and by 5 per cent on the more normal 1997. City analysts upgraded their 1999 profit forecasts to around pounds 185m from pounds 180m. "Next has emerged from a tumultuous 12 months a much stronger business," said Steve Woolf, retail analyst at Paribas.

Industry experts said Next would start feeling the benefits of the restructuring of its warehouses, which should yield a pounds 15m cost saving over the next three years.

The main worry is the Directory, which is set for another sales downturn this year. However, Mr Jones said the company would not chase new customers and would cut marketing expenditure by around a third.

Next shares have had an astonishing run, outperforming the market by 46 per cent since January. They were hit by profit taking yesterday, finishing 23.5p down at 718p. They are now on 20 times 1999 earnings, a discount to the market and to some rivals. With cost savings coming through and an economic soft landing on the cards, Next is a buy for the long term.