Increased production costs coupled with an uncertain consumer outlook will affect revenues for years to come, said fashion retailer Next as it unveiled a 15% rise in first half profits.
Retail sales at the UK company were towards the lower end of its guidance in the six months to 31 July, rising by just 2.2%, but Next Directory outstripped expectations with a 7.8% sales increase.
Next said it did not expect a double-dip recession in the UK or a “meltdown” in consumer spending, but warned that higher cotton costs may lead to increased prices in stores.
As such, the company expected to see “very little by way of growth in total consumer spending for the foreseeable future”, with this “new normal” likely to persist for three to five years.
“Looking forward, we believe the consumer environment may remain sluggish for some time,” said chief executive Lord Wolfson.
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By GlobalData“However, Next has proven avenues for expansion that we can exploit to increase total sales.
“We believe that these growth opportunities, combined with good cost control, strong cash generation and continuing share buybacks, can deliver healthy total returns for shareholders.”
