Next’s share price climbs as profits and sales rise, but retailer warns that Living Wage will cost retailer £27m a year
Next's share price climbed this morning after the high street giant revealed better-than-expected results, keeping it ahead of Marks & Spencer yet again.
Total sales up 2.7 per cent for the first half to the end of July. Pre-tax profits were up 7.1 per cent, while earnings per share rose eight per cent, thanks to the number of share buybacks the company has carried out. Margins have also improved thanks to tighter buying and better currency rates.
The dividend has grown six per cent to 53p per share, in line with full year expectations. As a result, Next's share price was up 2.4 per cent in early morning trading.
It comes as the retailer warns that implementing the National Living Wage will cost the business £27m each year from 2016 until the end of the decade.
Next year's increase will cost the business just £2m but thereafter the increases will be much higher, taking the total wage bill to £147m by 2020.
This will result in the retailer having to put up prices across the board by one per cent.
But the high street chain, which today revealed better-than-expected sales (again), said the increase was “unlikely to have a material effect on the trading performance of the business”.
“It should be noted that this is probably a pessimistic view of the required price rise as we have assumed no improvements in productivity,” the company said. “In reality,we hope to be able to compensate for some wage inflation through increased productivity throughout the business.”
Next is the second business this week to warn of increased prices. On Monday Costa Coffee parent company Whitbread warned it may have to raise some of its prices to offset the additional costs of the government-imposed measure.