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Progress in first half better than expected - Next
17
Sep '09
Chief Executive's Review
Progress in the first half has been better than expected and the business has proved itself resilient in the face of a weak consumer environment.

Sales in Retail and Directory were both ahead of our initial expectations. Full price VAT exclusive Retail like-for-like sales were down just -1.2% (though full price sales benefited from a smaller end of season Sale). Additional sales from new space meant that total Retail sales were marginally ahead of last year at +0.8%. Directory finished up +1.7%. Overall, Next Brand sales were up +1.0%.

To an extent this sales performance has been the result of a slight improvement in the consumer environment and favourable weather. We also believe that our ranges have improved and in particular we have increased the fashion content through earlier adoption of new trends. Stock and costs have been controlled well and, as a result, our net operating margin in the first half has moved forward in both Retail and Directory.

Our outlook for the second half remains cautious. We expect continued negative Retail like-for-like sales in the Autumn Winter season. Market consensus for this year's profit moved to a little above £400m following our July trading statement and it is likely to rise again as a consequence of this statement. The major variable, and therefore risk, to our estimates is the Retail like-for-like sales. Assuming that sales are within the budgeted ranges given in the Outlook section then it is likely that we will deliver profits close to last year's £429m. However, we would reiterate that much depends on our sales performance in the critical final quarter.

GROUP PROFIT
Profits in the core Next Brand businesses (Retail, Directory, International and Sourcing) were up 7.6%. Unrealised foreign exchange losses (which are likely to reverse in the second half) and an increased charge for vacant properties reduced operating profit growth to 0.7%. Group profit before tax increased 6.9% to £185m as a result of lower interest expense. Earnings per share increased at the slightly higher rate of 7.6% due to the lower average number of shares in issue following share buybacks in the first half of 2008.

PRODUCT, PRICING AND MARKETING
Over the past two years we have taken steps to improve the fashion content of our ... Click here for more details.

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