Profits at Next fell for the first time in eight years as the retailer admitted it had got its wrong by filling shops with fast fashion trends rather than wardrobe essentials.
The chain, often seen as a High Street bellwether, saw its profits fall 3.8 per cent to £790.2m in the year to January – the first time they have dropped since the financial crisis.
Chief executive Lord Wolfson pointed towards shift in consumer spending away from clothes and towards meals out and cinema trips, but he also admitted that Next had not stocked enough so-called ‘heartland’ products such as office trousers and blouses, focusing too much on snappy trend-driven designs.
Next saw its profits fall 3.8 per cent to £790.2m in the year to January
Wolfson, who has been at the helm of Next for ten years, said the issue had not been acknowledged until January. ‘It was masked by the success in faster-fashion pieces,’ he added.
However, the 59-year-old said this would soon be put right, and assured shoppers they would be able to see an improvement by the summer and the full range back in stores by the autumn.
Along with a decline in profits, Next posted a 0.3 per cent fall in total sales, although an increase in online Next Directory sales made up for the 2.9 per cent fall in in-store sales.
Rising costs from the fall in sterling since the referendum have sent prices at Next up 4 per cent, a trend Wolfson said would continue to hurt sales in the year ahead.
The results at Next – traditionally one of the strongest High Street retailers – is indicative of a shift in consumer spending
Next has sought to counter rising costs by shifting its manufacturing away from China and towards Bangladesh, Cambodia and Myanmar, which are at least 10pc cheaper.
For its fast-fashion pieces, which it needs to get into shops quicker, it typically uses factories in Portugal, Turkey and North Africa.
It also said it was ‘extremely cautious’ about the year ahead, with sales in the first quarter likely to be at the bottom end of forecasts for a drop of up to 3.5 per cent.
Climbing: Ted Baker saw its licence revenue jump 26.8 per cent, in a section of the business which lends its name to shoes, cosmetics and homeware
And it warned profits for the full year to January 2018 could be as much as 13.9 per cent down, issuing guidance of between £680m and £780m.
The results at Next – traditionally one of the strongest High Street retailers – is indicative of a shift in consumer spending.
Wolfson, who was paid £4.8m last year, said retail was suffering from a squeeze in real incomes, compounded by the move towards spending on experiences rather than ‘things’.
Analysts had expected the gloomy update from Next, after Wolfson warned in January that full-year profits would fall below market expectations. That sparked a 20 per cent plunge in the share prices, wiping almost £1bn off the value of the company.
But yesterday, shares rose 8 per cent or 314p to 4199p. Next proposed a final dividend of 105p per share, making 158p for the year.
Yesterday marked the last full-year results that chairman John Barton, 72, would preside over. After 15 years with the company, Barton is retiring and will be replaced by Michael Roney – the former boss of FTSE 100 outsourcer Bunzl
The boss of fashion brand Ted Baker has assured shoppers they will not see price rises at the till, as it posted soaring profits and revenues.
Ray Kelvin, who founded Ted Baker in 1988, said rapid expansion overseas meant it was protected against the fall in the pound since the Brexit vote.
The 61-year-old chief executive has led overseas growth, taking its quirky trend-led designs to 50 countries including Taiwan, Vietnam and Bahrain.
More than 40 per cent of its income comes from overseas, which helped the upmarket brand report revenues of £531m in the year to January 28 – an increase of 16.4 per cent on last year. Profits were up 4.4 per cent to £61.3m.
However Kelvin said some markets had proved difficult – in particular the US, thanks to the strong dollar. Elsewhere, Ted Baker saw its licence revenue jump 26.8 per cent, in a section of the business which lends its name to shoes, cosmetics and homeware.
It opened its first store in India, while further openings are planned in Australia, Dubai, Kuwait and Lebanon along with seven further concessions in Mexico. Ted Baker has 26 stores in the UK, usually in premium shopping locations rather than the traditional High Street.
Kelvin added: ‘We are seeing growth everywhere. People like our products and what we do.’
Ted Baker recommended a final dividend of 38.8p a share, making a total for the year of 53.6p a share – up 12.1 per cent on last year. However it did not reveal like-for-like sales – sales in stores open more than a year – which are widely considered to be a better barometer of performance.
Shares closed down 6 per cent, or 180p, at 2660p.