Young-fashion powerhouse River Island has defied the market to deliver record sales and profits for the year to the end of December.

The company, owned by the Lewis family, bounced back from a fall in profits in 2007 to record pre-tax profits of £160.5m, up 5.4 per cent, on the back of sales up 5.3 per cent to £766m.

River Island chief executive Richard Bradbury attributed the success to the retailer’s focus on product, and on its core customers. “It’s about sticking to your knitting,” he said. “The team have just continued to focus on being the best at what we do. That’s all you can do in a difficult market like this.”

He said River Island has benefited both from shoppers trading down and from shoppers trading up to River Island from value retailers for special occasions.

Young-fashion retailers have generally proven to be more resilient in the recession, but Bradbury refuted the suggestion that River Island’s customers have been unaffected
by the downturn. “It’s a complex market,” he said. “A lot of young people today have got tons of debt, and under-24s are the fastest growing segment of the unemployed in the country.”

Bradbury was cautious about the outlook for the economy, warning that the return of VAT to 17.5 per cent could harm the retail industry’s recovery. “The rest of the year is going to be very tough,” he said. “If VAT goes back on, it’s going to hurt trade. It’s a confidence issue and is symbolic, and I don’t think the economy is robust or that the corner has been turned.”

Verdict analyst Maureen Hinton said River Island’s understanding of its core customers was key to its success. “They’ve kept a strong focus on their customer group and the changing trends within that group, unlike a lot of retailers which stick with one generation as it gets older,” she said.

She added: “It does help that they have a younger customer base, but it’s a very competitive market and they’re very good at establishing a really strong handwriting, which enables them to justify charging a premium over the value retailers.”

Bradbury said River Island’s long-awaited new website will launch in the next month, and while it will include a raft of new features, the emphasis will be on providing as straightforward a shopping experience as possible.

The retailer has also continued to expand its international business with further stores in Moscow, Singapore, Holland and Poland.

It intends to continue its sponsorship of Graduate Fashion Week following the success of what Bradbury described as a “great” event this year.