Next annual profits show first fall for eight years
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."
Despite the profits fall, Next shares surged as much as 9% at one stage as investors breathed a sigh of relief that the chain had not downgraded its forecasts for the year ahead.
George Salmon, equity analyst at Hargreaves Lansdown, said Next had been hit by internal and external factors, which has seen its share price halve in the past 18 months.
He added: " After years of solid growth, the Directory division has started to splutter recently. Online retailing moves fast, and Next has fallen behind the curve.
"The group is now taking steps to improve, particularly in mobile, but results will need to be delivered quickly if it is to offset the continually declining sales in stores."