Next and Ted Baker fashion a recovery

Two of Britain’s best-known fashion chains posted higher full-year profits as official figures suggested that shoppers had returned to the high street last month.

Both Next and Ted Baker benefited from store expansions, lifting their respective underlying profits by 9 per cent and 16.5 per cent.

Next chairman John Barton said the group had performed well against a tough economic backdrop but forecast a “challenging year ahead, with little if any growth in the UK retail economy”.

The cautious stance came as it emerged that sales at the 541-strong retail estate had been flat in the year to January while its online and catalogue Directory business had notched up a near-10 per cent rise in revenues, helping to buoy profits.

Ted Baker saw its full-year earnings boosted by a solid performance in its home market, overseas growth and investment in online trading.

The designer brand, whose roots lie in a Glasgow shirt shop business, opened its first stores in Beijing and Tokyo, while its second outlet in China followed after the year end, in Shanghai.

Expansion in the UK, where the company has 180 stores, will see it open two outlets at Gatwick airport in June.

The twin results statements came as figures from the Office for National Statistics (ONS) revealed that high street sales had grown by a better-than-expected 2.1 per cent last month.

Strong sales of tablet computers helped drive the bounce-back, while department stores also benefited with sales up 10.6 per cent. The surge in retail sales volumes came after a dire January, when many small shops were forced to shut as snow blanketed much of Britain.

Peter Saville, partner at restructuring firm Zolfo Cooper, said: “This is certainly a step in the right direction, but retailers can’t afford to take their eye off the ball. Struggling firms will need to follow in the footsteps of these successful retailers by staying on top of the latest trends, providing an innovative experience for shoppers and developing a multi-channel approach.”

Howard Archer, chief UK economist at IHS Global Insight, the forecasting group, described the retail sales surge as “really good news”.

He added: “A sharp rebound in retail sales in February gives a significant lift to hopes that the economy can avoid further contraction in the first quarter of 2013, thereby avoiding ‘triple dip’ recession.”

Next’s results showed that underlying profit before tax had risen to £621.6 million, while the total dividend was increased by 16.7 per cent to 105p. It marks the fourth consecutive year that the shareholder payout has grown by more than 15 per cent.

Ted Baker’s profit before tax and exceptional items for the year to 26 January came in at £31.5m. The total dividend was lifted 13.7 per cent to 26.6p.

Founder and chief executive Ray Kelvin, who started the company as a Glasgow shirt store in 1988, said: “I am pleased to report another strong performance in what has been a very exciting year for the Ted Baker brand.”