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Clothing retailer Next is going after well-heeled shoppers for the first time stocking £300 suits and £150 evening dresses that will compete directly with Marks & Spencer's upmarket Autograph label.
"We are pushing the boundaries of the Next brand," said Lord Wolfson, its chief executive, as the retailer reported an almost 20% increase in first-half profits. "We know our customers buy jackets and dresses for more than £100 so we thought we'd have a crack at selling them."
Next usually prices its eveningwear at under £80, but Wolfson said it had stretched its prices to include "premium products selling at prices we would previously have shied away from".
The initiative follows strong first-half sales, with the retailer attributing some of its success to taking greater risks with its fashion collections. It has also started buying stock for all four seasons, rather than dividing the year into two as most retailers do, helping it to have more weather appropriate clothing on sale during the unpredictable spring and autumn months.
Pre-tax profits at Next jumped 19% to £324m in the six months to July with the retailer continuing to outperform rivals such as M&S thanks to its fast growing home shopping business Directory as well as expansion overseas. Despite the big leap in profits the figures fell short of some analysts' expectations and the shares closed down 3% at £69.50.
Next recently launched a website in China and Wolfson said the vast market presented an interesting opportunity. But he cautioned it also presented "many logistical and administrative challenges", and would not generate meaningful sales for some time as the retailer learned how best to operate in the country.
The Tory peer, who is a member of George Osborne's inner circle, said Next's performance had also been buoyed by the improving economy, low interest rate environment and the availability of credit. But he pointed to clouds on the horizon: "When interest rates do go up the Next customer base is likely to be affected more than most. We're at the top end of the mass market and a lot of our customers are at the peak stage of their mortgage."
The department store chain John Lewis also reported a strong first half with operating profits up by 62% to £56.3m. Last year its results were depressed by exceptional staff costs relating to miscalculated holiday pay and a round of redundancies among its department store managers. Like-for-like sales were up 8.2% for the six months to 26 July.
Its managing director, Andy Street, said sales had been boosted by loyalty card perks such as free coffee and cake. The revival in the housing market boosted its home furnishings departments, where sales were up 7.4%. The retailer, part of the John Lewis Partnership, also reported bumper fashion sales, up 9.1% – fuelled by a 33.9% increase in online orders – after it made it easier for shoppers to browse the website via their smartphone.
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