Next says surge in sales growth not sustainable

Next, the high street retailer, admitted yesterday that its 8 per cent underlying sales growth in the first half was unsustainable.

The company reported strong interim figures, with a 15 per cent rise in pre-tax profits to £93.0m, for the six months to 28 July, and no sign of a slowdown in consumer spending.

Sales in the company's stores grew 19 per cent to £559.5m, with like-for-like sales 8 per cent higher. Next said it is expecting to grow profits further in the second half.

However, Simon Wolfson, Next's new chief executive, said that this was not a sustainable level. Three to 5 per cent was a more repeatable level of like-for-like sales growth over the next five years.

Paul Smiddy, an analyst at Credit Lyonnais, said even 3 to 5 per cent growth was an "ambitious" long-term target in UK clothing.Next had received a short-term boost from buying some of the stores being vacated by C&A, which is exiting the British market.

Mr Wolfson said Next's fortunes were not tied to the economic cycle. "Over the last 12 years, the economic environment has not been the key. It has been our product, which stimulates demand."

Next's formal wear ranges performed well, he said. "I think 'dress down' is on the decline. People want to go smartly dressed to the office."