What's Next?

While the higher-than-expected 10.2 per cent rise in first-half underlying profit was welcomed, news that trading in August and early September has been 'disappointing' and unusually quiet was taken as something more than one of Next’s characteristic attempts to err on the side of caution. So having finished the first half with brand sales growth at the top of its 2 to 4.5 per cent target range - all of which came from Next Directory, which now accounts for half of group operating profits - growth rates are now running at about the middle of that range. But August is often a strange month for retailers and the Olympics made it harder still for Next to interpret, so it’s really too early to draw firm conclusions. "There are factors in there that mean we don't think things will be down in the same way for the rest of the year," says finance director David Keens.

Meanwhile, the retailer continues to make good progress with its own initiatives aimed at shoring up flagging like-for-like high street sales. The like-for-like sales fall on the high street reduced profits by £18m, but this was more than made up for by a £14m contribution from new stores and £26m from increased online sales. In addition, the group managed to push through £23m of cost savings, which offset inflationary pressures.

Share buy backs funded by the group’s strong cash flows also, as usual, played an important part in the performance from the perspective of shareholders. In the period, around £112m was spent on buybacks which along with a lower tax charge resulted in an 18.7 per cent rise in underlying EPS to 118.5p. Upto £200m of buybacks are planned for the year as a whole.

Broker Peel Hunt forecasts full year pre-tax profits of £607m and EPS of 265p (2012: £570m and 237p).