Clothing retailer Next Plc posted a 3.6 percent increase in first half protect profits on Wednesday, as a surge in its catalogue and Internet business helped offset a drop in samem store sales.

Shares in the fashion and homewares retailer traded up 3.4 percent at 1,763 pence by 8:55 a.m., outpacing a 0.5 percent rise in the DJ Stoxx European retail sector index. The stock hit a peak of 1,770p, its highest since mid May.

These results are well ahead of consensus estimates and we expect market estimates to increase, brokerage Bridgewell said in a note.

Pretax profit for the six months rose to 178.9 million pounds from 172.6 million in the same period of 2005.

Earnings per share rose 11.3 percent to 53.3p, largely thanks to a series of share buybacks. The interim dividend was increased by 10.7 percent to 15.5 pence a share.

The results reflected a shift in Next customers' buying habits as first half like for like sales at Next Retail stores fell 7.5 percent, driving Next Retail profits down 7.9 percent.

In contrast, sales at its home shopping business Next Directory were 15.3 percent ahead of last year.

Internet orders made up 45 percent of Next Directory sales, reflecting a trend for Britons to buy more online.

Next Financial Director David Keens said the six month fall in sales at Next Retail was due to the uncertain economic environment, a better performance by its competitors, including supermarkets such as Tesco, and its product range.

TOO MANY PRODUCTS

We've had too many products in our range and we've made it too confusing for our customers to shop, Keens said in a telephone interview, adding plans to remedy this were underway.

He added Next also planned to boost its Internet offering.

Industry body IMRG reported last month UK Internet sales growth, though still only small, is outpacing total spending in shops by 10 times.

In the current trading period from July 30 to September 9, Next said like for like sales (in stores that traded continuously and were not affected by the opening of new space) were up 0.3 percent on last year.

Next said it saw its Next Retail like for like sales in the second half falling between 2 and 5 percent, with total sales up due to new store openings. Next Directory product sales are expected to be up between 7 and 9 percent.

Keens said Next continued to expand its Internet and catalogue offering but was committed to selling its women's, men's and children's fashion and home furnishings through as many media as possible.

It is a really important part of Next that we have stores, catalogue and internet providing access to the one range. We want it to be as easy to the customer as possible, Keens said.

Next shares had spiked up nearly 5 percent on Friday as traders said there was speculation private equity groups could be circling.

Keens said Next declined to comment on market speculation.

Next added in the statement it aimed to issue a long term bond in the near future, subject to market conditions. It currently has a 300 million pound bond which matures in 2013 and 700 million pounds of medium term bank facilities.

United kingdom