The UK will not enjoy a sustainable recovery until people stop getting poorer, Simon Wolfson, the chief executive of Next, has warned. He said the high street was benefiting from a more buoyant housing market and more confident consumers. But he warned: „In real terms, people are still getting poorer. The retail economy has benefited from the elimination of the credit squeeze but that needs to be translated into growth of real earnings.“
Wolfson said there was every chance a wider recovery would emerge, but it would take at least a year. „It is a mistake to believe we are in the recovery now,“ he said. Next has revealed a 2.2% rise in sales over the most recent six months, while profits rose 8.2% to £272m.
The company said it had lost several million pounds worth of sales because it had run out of summer clothing in August during the heat wave, but benefited from being more adventurous with its fashions and responsive to trends. Next was also helped by an improvement in the housing market which boosted sales of its furnishings. But Wolfson warned: „For house price rises to translate into meaningful underlying growth this increase in activity must be converted into house building rather than price rises.“ He said price rises would give the economy „a problem“ because they were unsustainable.
Next appears to be taking a bet that the housing market will continue to do well as the retailer wants to add 1.4m sq foot of retail space in the next three years, much of which will be in out of town retail parks. Most of these will be store extensions as Next wants to increase its four fashionand home and garden stores to 33, 12 more than it previously promised.
While Next is seeing strong growth online, Wolfson said that physical stores were still profitable and popular with shoppers with 38% of online orders picked up on the high street.