Next annual profits show first fall for eight years

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High street giant Next has revealed its first fall in annual profits for eight years as it was hit by sliding sales and warned that 2017 is set to be "another tough year".

The retailer posted a 3.8% fall in underlying pre-tax profits to £790.2 million for the year to January - the first fall in profits since 2008/09 at the height of the financial crisis.

Next confirmed it had hiked prices by 4% on average for the first half of the year and warned prices would remain under pressure in the second half from rising buying costs caused by the Brexit-hit pound.

Chief executive Lord Wolfson said: "The year ahead looks set to be another tough year for Next.

"We remain clear on our priorities going forward. We will continue to focus on improving the company's product, marketing, services, stores and cost control."

Next saw overall sales fall 0.3% over the year, dragged lower by a 4.6% slump in full-price shop sales. Total retail sales dropped 2.9% to £2.3 billion.

It was "extremely cautious about the outlook for the year ahead", with sales in its first quarter likely to be around the "bottom end" of forecasts for a drop of up to 3.5%.

The group reiterated warnings made in January that full-year profits could fall by as much as 14% as it is braced for the impact of its price rises and an ongoing shift in spending away from clothing as well as pressure on wages from Brexit-fuelled inflation.

Lord Wolfson admitted last year's sales woes were partly down to its product range, with its lines missing the wardrobe staples Next is renowned for, such as easy-to-wear work blouses in a number of colours.

He said: "In focusing so much energy on changing our buying culture, processes and adopting exciting new trends, we have omitted some of our best-selling, heartland product from our ranges."

The group said it took action in late January to start overhauling its ranges to include more of these items, but the full impact of changes will not be seen until September.

It is also revamping its Next Directory offering, including rolling out a Next Unlimited offer allowing UK customers to pay £20 for a year's unlimited next-day delivery.

Lord Wolfson said sales will remain under pressure but show some improvements in the second quarter before starting to see a "sea-change" in the final six months.

But he added: "It's going to be a really tough year."