Next admits August stock blunder

NextClothing retailer Next has admitted a stock blunder following the summer heatwave left it short on warm weather fashions in August.

The chain said volatile trading, with customers only buying new clothes when they need them, meant the warm August "worked against some of our clothing ranges".
Next said it failed to stock enough warm weather "transitional stock" - to sell after its July sale and for the launch of its autumn range.

The retailer revealed the weather blow as it reported 2.2% revenues growth to £1.68 billion in the six months to the end of July, helped by its expanding footprint and online sales. The retailer's flourishing online directory business drove pre-tax profits 8.2% higher to £271.8 million.

Next did not quantify the impact of its stock blunder but said it must also take greater risks on buying fabrics - purchasing key materials in greater quantities earlier in the year.

Anusha Couttigane, fashion consultant at Conlumino, said Next was let down by "flaws in its forward planning".

"This is a planning error which mature high street players should not fall victim to," she said.

Next said that while trading conditions look set to improve gradually on looser credit to households and businesses, "talk of a full-blown recovery is premature".

The clothing giant defied the tough retail climate by laying out plans for a major land grab over the next five years, by opening another 1.4 million square feet of new space.

It currently trades from 541 stores in the UK and Ireland - equivalent to 6.7 million sq ft of space - after adding 145,000 sq ft of space during the half.

The chain is taking advantage of the tough retail climate to secure cheaper, shorter leases at good locations, helping it replace tired older stores with new outlets.

The retailer said: " The addition of new retail space sounds counter-intuitive in an environment of declining like-for-like sales and growth in internet sales. However, we believe that investment makes sense."

Next said new stores earn net profit margins of 22%, and pay back the capital investment in 19 months. Without new space, its store profits would have fallen through the downturn, it added. About 90% of its stores earn profit margins of 15% and above.

It plans about 300,000 sq ft of new space this year, accelerating to 450,000 ft sq next year and in 2015. However, the 1.4 million sq ft ambition depends on planning permission, it added.

Next said there has been a "sea change" in many local councils' attitudes to retail development, with a "much better understanding of the economic advantages and employment it can bring to an area".

The retailer has planning permission for 11 large stores typically incorporating fashion, home and garden products, and another 18 are in the pipeline.

It said new stores are widely used by its online customers, with more than a third of internet purchases collected from stores.

Takings in its stores fell 0.9% during the half to about £1 billion, although that included the snow-hit start of the year when they fell 1.9%. Store profits grew 1.3% to £124.3 million.

Sales at its Next Directory business, which includes online orders, grew 8.3% to £597.6 million, while profits were 13.4% higher to £156.1 million.
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