Next and Ted Baker post bumper profits

Next and Ted Baker both lifted the City with heady earnings growth

Ted Baker, founded as a shirt specialist with a single Glasgow store in 1988, said sales in its UK and Europe retail division were up 16.7 per cent to £231.8 million in the year to 31 January after a good performance in its established UK market and continued expansion in Europe.

Overall, revenues were 20 per cent higher at £387.6m and pre-tax profits lifted 25 per cent to £48.8m as founder and chief executive Ray Kelvin hailed “another excellent year” for the business, which has 398 stores and concessions.

Independent retail analyst Nick Bubb said the results “from mighty Ted Baker look very good, and there is no sign of the tough spring season being endured by many UK fashion retailers”.

Next on the other hand sounded a note of caution despite building its advantage over rival Marks & Spencer with a 12 per cent rise in annual profits. Its surplus of £782.2m comes after a year in which overall sales topped £4 billion for the first time with an increase of 7.2 per cent.

Next, which last year beat the profits figure achieved by arch-rival M&S for the first time, said it hoped to make as much as £835m in the current financial year.

However, it remains cautious about prospects and has pencilled in sales growth of between 1.5 per cent and 5.5 per cent in the current year. That is slightly weaker than the range the company forecast in December.

Chief executive Lord Wolfson said it would be a mistake to be over-optimistic despite the company’s recent progress.

He added: “Although the consumer economy looks benign, we remain very cautious in our sales budgets.

“Whilst we are happy with most of our current product ranges, we recognise that some collections are not as strong as they were at this point last year.

“In addition, during the spring and summer seasons, we face very tough comparative numbers from last year, when sales were assisted by unusually warm weather.”

Trading space increased by 330,000 square feet during the year to 7.4 million square feet. Store numbers remained broadly the same, with the impact of 20 new shops being offset by the closure of 22 smaller, less profitable outlets.

Analyst Alistair Davies, at Investec, said: “Strategically, Next continues to focus on Retail evolution – adding new space with larger stores, and more emphasis on ‘home’ – and more is being invested into Next Directory to arrest declining credit customer numbers.

“The strength of cash generation should underpin the share price longer term, but short term weakness may be expected.”

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