• FY earnings up 14.8% to GBP634.9m (US$943.2m)
  • Operating margin improves 0.8% to 16.3%
  • Sales grow 7.2% to GBP4.03bn
Next total retail sales grew 4.8% for the year

Next total retail sales grew 4.8% for the year

UK apparel retailer Next has delivered an "impressive" full-year performance, despite poor weather and prevailing market conditions, analysts have said.

Earnings grew 14.8% to GBP634.9m (US$943.2m) in the year to January, from GBP553.2m a year earlier. Sales from new retail space, existing stores and additional online sales added to the group’s profit growth.

Operating margin improved by 0.8% to 16.3%, while group sales were 7.2% ahead of last year at GBP4.03bn.

Total retail sales grew 4.8% to GBP2.35bn, of which new space contributed 3.4%. Next Directory sales were up 12.1% to GBP1.54bn, while brand sales increased 7.6% to GBP3.89bn.

Next Sourcing continues to provide more than 40% of Next brand stock from its global supplier base, sourcing from 18 countries. The retailer is forecasting sourcing profits for the year ahead of GBP47m.

"Next Sourcing has made excellent progress controlling costs, and its margins are now approaching historical highs," the company noted. "There is an opportunity for NS to be more competitive and the board has taken the decision to lower their commission rate by 1% for spring 2016 stock."

David Alexander, consultant at Conlumino, said Next has had "a very good year", with the retail heavyweight achieving sales growth near the top end of the guidance it issued in March last year.

"The figures are all the more impressive given the prevailing storm of market and meteoreological conditions. A profit warning in October, as the unseasonably warm weather deflated sales of its autumn/winter collection, proved to be nothing more than a blip."

For the full year, Next is budgeting for full price sales growth to be up between 1.5% and 5.5%, with the first half expected to be up 0% to 3%, and the second half up 3.5% to 7.5%. Group profit before tax is expected to be between GBP785m to GBP835m.

Bernstein analyst Jamie Merriman, noted: "As we have expected, we are beginning to see the end of margin expansion, as growth shifts from the higher margin UK Directory business to slightly lower margin growth from Label and International Directory. We expect these to be areas of incremental sales growth for the business, which is good for overall profit, but these channels are likely to mean that earnings growth from here will more closely match sales growth."