The 480-store chain said that like-for-like sales fell 7.2 per cent in the year to January and that in the seven weeks since then like-for-likes were down 0.3 per cent.
Broker Seymour Pierce said that this was 'much better than expected', but that Next could not continue to rely on cost savings and higher margins to 'push up profits indefinitely'.
Next said that trading figures should be 'treated with some caution', because they included the run-up to Mother's Day, whereas last year's did not.
As was expected, the poor performance of Next's high street shops was rescued by a 13.1 per cent growth in sales from the retailer's Directory business.
Turnover increased from£685 million the previous year to£774.5 million.
However, Next chief executive Simon Wolfson warned that the 'growth in Directory customer numbers will be slower in the year ahead'.
He cited a higher threshold for credit status because of problems with bad debts last year and an anticipated increase in competition - particularly online, which accounted for half of the Directory division's sales.
Wolfson admitted the continuing poor performance from the retail division was disappointing. He said: 'Sales were a disappointment and stabilising this measure will be our primary goal in the year ahead. What we have to do is recapture some of the magic and excitement that has gone hand in hand with the success of Next over many years.'
He said that like-for-like sales this year would remain down between 1 per cent and 4 per cent on the previous year, but listed three key areas that Next would focus on to turn this situation around - improving the product offer, improving marketing, developing the shop fit out.
Next will spend£10 million this year on advertising compared with£1.5 million last year.
Wolfson said it would also spend£97 million to undertake 'a more radical review of our shop fit'. This will include the overhaul of 13 per cent of its stores.
He added: 'We believe the consumer environment will remain challenging. While we are still cautious for the year ahead we do expect to make progress in stabilising Next like-for-like sales.'
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