Shares in Next fell by 2.5% this morning after the group released half year results.
Retail operating profit fell by 16.8% to £134m, as margins and like-for-like sales decline.Directory performance is brighter though, with improvements in both margins and sales helping. operating profit to increase by 10.9% to £204m.
Despite a 1.5% drop in profit before tax, Next’s £176m of share buybacks ensured that earnings per share rose by 0.8%.
Next has declared ordinary interim dividend of 53p per share, in line with last year, with another £30m of buybacks expected this year.
George Salmon, Equity Analyst at Hargreaves Lansdown:
“Next’s results show in real time the changing habits of the UK consumer. With its stores reporting falling sales, Next is dependent on the online Directory business for growth. Unfortunately, as competition intensifies online, their Directory division has come under pressure too, meaning the shares have spent 2016 going backwards.
Hopes had been building for something of a summer recovery on the UK high street, but Next’s comments today have tempered that optimism a touch. July sales are ahead of last year, but the group say that the improved performance was due to a larger than normal sale, and that trading has dropped off more recently.
Although conditions continue to look tough, there was some good news today. Early indications suggest some of the self-help measures introduced earlier in the year are starting to have a positive effect in Directory. Historically, Next has been a well-managed business and has delivered excellent returns to shareholders. Investors will be hanging their hat on the management’s solid track record continuing.”
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