Next profits up but sales dip

A CRACKDOWN on internet fraud and tightened credit rules has helped boost profits by £12 million at Next Directory - as its owner, retail chain Next, said it was to launch its first TV advertising campaign in ten years to jettison its "boring" image.

The news of the advertising campaign, which begins this Friday, came as Next's chief executive, Simon Wolfson, unveiled interim pre-tax profits up 11 per cent to 198m from 179m.

This was well ahead of City expectations, and Next's shares closed up 4 per cent, or 79p, at 1,940p.

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However, the fashion retailer also said like-for-like sales fell 3.6 per cent in the six months to July in a tough retail climate, and were down a further 4.8 per cent in the six weeks to 8 September.

Wolfson said he expected the sales decline to moderate to between 1 and 3.5 per cent over the second half.

Next's 488 stores saw fairly flat profits in the trading period of 112.5m - up from 111m a year earlier - while profits at the catalogue shopping operation, Next Directory, rose to 73.8m from 59.6m. About 12m of the latter division's improvement was a result of a sharp fall in bad debts following changes to the credit vetting of new applicants for the Next Directory.

Wolfson said: "In particular we made changes to the ease with which customers could obtain credit on the internet, an area where we had experienced significant fraud."

Sources said the company suffered losses of between 1m and 3m through internet fraud in the period spanning late 2005 and early 2006.

Wolfson said Next had made a conscious decision to have more goods at mid-range and top-of-the-range price points, and to change fashion lines more quickly to capitalise on trends. "The criticism of 18 months ago was that when customers came in [to our shops], it was reliable but boring," he said.

In future, Next would focus on introducing new lines more often "and buying into new trends with greater conviction". He said: "This requires us to take significant positions without concrete evidence that they will be successful.

"Whilst this may appear more risky, the alternative is to fall back on last year's best-sellers, which only guarantees slow failure."

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In October Next will have new lines in its shops comprising 52 per cent of what is on offer. A new upmarket women's brand, Signature, will be launched.

About 12 per cent of Next's stores will have been refitted over the trading year, and a further 16 per cent redecorated.

• French Connection's interim losses fell to 2.5m from 3.6m, but the firm said the autumn would be "challenging".