Speculation is mounting that private equity groups may launch a bid to buy UK fashion retailer Next Plc after the company reported stronger than expected first-half results.

The retailer's pre-tax profits for the first half of 2006 were up 3.6% on last year to GBP178.9m (US$335m), well ahead of analysts' expectations.

The robust results are only likely to strengthen speculation that private equity groups may try to acquire the company.

Like-for-like sales at Next Retail fell 7.5%, but the company's home shopping business Next Directory saw sales rise 15.3%, with 45% of orders being made via the internet.

The company is now planning to boost its internet offering, but financial director David Keens maintained that Next wanted to make its products available to customers through as many media as possible.

Next said the downturn in Next Retail's business was caused by increased competition, an uncertain economy and having too many products in its ranges - adding that it was seeking to address the latter.

The company expects its retail like-for-like sales to fall further, by 2-5%, in the second half of the year, but its Next Directory sales to increase by 7-9%.