Next backs its shops estate after a slump

Next defied the High Street doom-mongers on Thursday, insisting there is a profitable future for its sprawling shops estate.

Chief executive Lord Wolfson said the retailer had taken a “long hard look” at the 530-strong portfolio, including with bank-style financial stress tests.

Even in the worst-case scenario for a 6% slide in annual same-store sales over 10 years, Wolfson says the estate generates £1 billion of cash.

He said: “There are those that believe that retail shops will be more of a liability than an asset in the future. We do not see it that way.”

He added the shops were also important for the increasing number of online customers who collect and return their orders through stores.

Retail profits slumped 33% to £89.5 million in half-year results on Thursday.

This was offset by continued growth in Directory, up 6.3% to £217.1 million.

Overall, profits were down 9.5% to £309.4 million but Next managed a modest upgrade to full-year guidance following better trading in recent months.

The shares jumped 11% to 4901p, with investors cheered by comments that Next’s autumn ranges have gone down better with consumers than those in the spring.

Wolfson added: “The retail environment remains tough, but our prospects going forward appear somewhat less challenging than they did six months ago.”

Average selling prices are likely to be up 4% this winter. However, Next expects inflationary pressures to unwind, with price rises of no more than 2% in the first half of 2018.