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Squeeze on high street

Profits and sales fall at Next in ‘challenging year’

Next Straiton

Next has seen a squeeze on margins

Fashion and homeware retailer Next said annual profits fell 8.1% to £726.1 million and warned 2018 will be another “challenging year”.

It is the third consecutive year of falling profits for the one-time market darling which held its proposed final divided at 105p per share.

The retailer said its performance was in line with guidance with group sales at £4.1 billion, down 0.5% compared with the previous year, while online full-price sales increased by 11.2% compared with 2016.

Net trading space increased by 51,000 sq ft, taking the portfolio to 8m sq ft. In September 2017 the firm forecast trading space to increase by 85,000 sq ft.  However, this estimate included two large stores that were planned to open in 2017 which are now expected to open in 2018. 

In a statement on plans for store openings the company said:  “The new store portfolio marginally missed its sales target, largely because many of the targets were set some time ago at the point we negotiated terms for these properties; a time when prospects for retail stores were more benign.  Payback is forecast to be slightly higher than our 24 month goal.

“Of the 17 store closures, three were as a result of consolidating two stores into one location.  As set out in the table below, the remaining 14 stores made an average 12% profit (before central overheads). 

“Excluding the one store which was subject to a compulsory purchase, the average profitability of the stores was 9%.  We would not necessarily actively seek to close stores making a 9% margin however we would rarely agree to a new lease at these levels of profit.”

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