Next shares drop 5% on 'cautious' sales outlook

Retailer Next fell 5.4% in London trading after saying it was "very cautious" on its outlook for 2015.

The price fall came despite Next reporting profit for the year to the end of January rose 12.5% to £782m on sales of nearly £4bn and a hefty dividend rise of 16%..

The company said that investment in improved product design had paid off.

Next met its profits target - revised down in December from previous hopes - after slowing second half sales growth.

"Although the consumer economy looks benign, we remain very cautious in our sales budgets. Whilst we are happy with most of our current product ranges, we recognise that some collections are not as strong as they were at this point last year," said Next chief executive, Lord Wolfson, in a statement.

Next set a wide target for sales growth for the coming year of between 1.5% and 5.5%.

Dividend increase

Profits are expected to be between £785m and £835m.

The firm added that dividend payments were increased by 16% to 150p a share.

Its sales gains were led by Next Directory, its online and catalogue business, which increased by 12%. Total sales advanced 7%.

Next shares traded down as much as 5.4% before recovering to a drop of 3.4% for a value of £73.65 apiece. The stock traded at an all-time high on Wednesday.

"A history of innovation, coupled with a strong macro environment, means Next remains a robust stock for investors," said Ketan Patel, senior analyst at Ecclesiastical Investment Management.

The retailer's share price rose by 14% during the 2014 trading year, from £62.80 to £71.50.