Next is looking to implement online and technology improvements to help it cope with what it believes will be a difficult year ahead.

In today's full-year report, CEO, Lord Wolfson said: "The year ahead may well be the toughest we have faced since 2008. We are very clear on our priorities going forward and whatever challenges we may face, it is important that we remain focused on ensuring that the company’s product, marketing, services and cost controls all improve in the year ahead."

The gloomy outlook comes as Next reports a "solid" set of annual results for the year ending January 2016, with underlying pre-tax profit increasing 5% to £821.3 million.

Group sales rose by 3% to £4.1 billion. Retail brick and mortar sales increased 1%, while the Next Directory – which includes online and catalogue sales – increased 8%.

The retailer plans to digitally upgrade the Next Directory and invest in online growth to help it cope with the coming year. Objectives include improving its eCommerce and mCommerce sites, as well as developing new online advertising and email techniques.

Catalogues

Over the last five years, the Next Directory has increased sales by over 75% by launching a new brand and expanding online internationally. But the retailer said growth in the core UK Directory business has "inevitably slowed as the business has matured".

Wolfson said: "Partly this is as a result of competitors catching up with our delivery and warehousing capabilities; partly as a result of changes in the ways customers are shopping online. It is this last point that provides us with the opportunity to improve the business going forward."

Wolfson said customer desire for catalogues is declining – 98% of customers received large catalogues in 2010, compared to 53% in 2015.

"Those customers who continue to receive catalogues still value them, so we do not intend to abandon our printed brochures," confirmed Wolfson. "Indeed, for the 1.6 million customers that want catalogues, providing a regular flow of new and exciting publications remains the most important way we can engage with these customers."

Over the next year, Next plans to rationalise and expand the distribution of brochures and catalogues, as well as investing an additional £8 million (UK and overseas) into targeted online advertising and email campaigns, aimed at re-activating existing customers and recruiting new ones. But Wolfson warned this investment in 2016, would be unlikely to provide a return until 2017.

eCommerce and mCommerce

From autumn 2016, Next plans to introduce personalisation technology to its website. But the main challenge remains in mobile, because conversion rates are much lower (8.5% desktop, compared to 7.7% on tablet and 4.2% on mobile). "However we believe we can narrow the difference," said Wolfson.

The retailer has recently mobile optimised its website for mCommerce shoppers, which has already led to an increase in conversion rate from 4.2% to 5.8%. But iPhone owners are still presented with Next's normal desktop website. The retailer hopes to roll out this iOS update over the next few months.

The retailer also launched its iPad app in August 2015, which increased conversion rates from 7.7% to 10%. Next intends to focus on converting more iPad customers to the app, while in May 2016 it plans to release a new version of the iPhone app to mirror the improved functionality on the iPad, while an Android version will follow in July.

Next is also planning to improve its delivery service over the next year in two ways: Providing Click & Collect and returns from third party parcel shops (September 2016) and narrowing its home delivery window to two hours (December 2016).

Credit

Next also said maintaining its credit customers remains its toughest challenge, with average numbers declining by 4% last year. The retailer aims to improve its credit offering over the next year, by improving statements and enhancing the 'My Account' area of the website. But Next still expects its credit customer base to continue to decline by around 5% this year.