Digital rev­enue levy will hit high street, says Next boss

Re­tailer brings a much-needed re­minder that the high street isn’t com­pletely dead and that there is still a fu­ture in bricks and mor­tar ‘Sell­ing other brands has paid off hand­somely, boost­ing sales of its own clothes’

The Daily Telegraph - Business - - Front Page - Laura Onita By

THE boss of Next has heav­ily crit­i­cised plans for a digital sales tax, warn­ing it is a danger­ous idea that will fur­ther trash the ail­ing high street.

Simon Wolf­son said that an on­line levy would ham­mer de­mand for the click-and-col­lect model that has helped re­vive many re­tail­ers’ for­tunes – giv­ing con­sumers yet another rea­son to shun bricks and mor­tar shops.

Min­is­ters are re­port­edly con­sid­er­ing an in­ter­net sales tax as part of ef­forts to bol­ster the public purse and court cam­paign­ers de­mand­ing ac­tion to curb the power of US ti­tans such as Ama­zon.

But speak­ing as Next re­vealed it had suf­fered a less se­vere sales slump dur­ing lock­down than first feared, Lord Wolf­son said the pro­pos­als are badly thought through.

He said: “There is a po­ten­tial for a mas­sive own goal [from the Trea­sury],” he said. “It could se­verely re­duce the num­ber of peo­ple go­ing to the high street if click and col­lect is taxed.”

Next now makes about half its rev­enue from goods sold through the firm’s web­site or click and col­lect in store. It has proved one of the few tra­di­tional re­tail­ers able to cope with a dra­matic shift on­line by shop­pers.

It was this week re­ported the Chan­cel­lor is con­sid­er­ing two types of on­line tax: a levy of 2pc on all goods bought on­line, to raise £2bn a year, and a fee on con­sumer de­liv­er­ies that would help to curb pol­lu­tion.

Lord Wolf­son is not com­pletely against a tax on home de­liv­er­ies, but said it would be a mis­take to im­pose one on goods bought on­line and picked up from a shop. He said in­stead of an on­line tax hike, the most use­ful change would be to re­form busi­ness rates.

Next boss Lord Wolf­son has sur­vived enough crises to know not to panic. But even he sounded alarmed at the start of the pan­demic, de­scrib­ing it as some­thing that has “sim­ply not been ex­pe­ri­enced by a mod­ern global econ­omy”. Fast for­ward less than three months and the usual sense of calm has been re­stored af­ter the chain re­ported a lower-than-ex­pected fall in quar­terly sales and up­graded profit guid­ance. It also pre­dicted that even in a worst-case sce­nario it will fin­ish the year £15m in the black but could post prof­its of as much as £330m.

“The com­pany is in a much bet­ter po­si­tion than we an­tic­i­pated,” Wolf­son says. What a re­fresh­ing change from all the profit warn­ings and the gloom that has cast a seem­ingly per­ma­nent shadow over the high street.

Its shares rose al­most 8pc yes­ter­day, mean­ing the stock has re­bounded 65pc from an eight-year low of £33.90 at the be­gin­ning of April.

But, as ever with Next, it’s the de­tail that stands out. There were fewer re­turns; sur­plus stock was kept down; and it is plan­ning to boost on­line sales fur­ther by push­ing back the cut-off time for next day de­liv­er­ies from 8pm to 10pm.

It is a much-needed re­minder that the high street isn’t com­pletely dead and that there is still a fu­ture in bricks and mor­tar. More cru­cially per­haps when hun­dreds of stores are clos­ing ev­ery week, Next demon­strates that it is pos­si­ble to have suc­cess­ful shops along­side a thriv­ing on­line op­er­a­tion.

Footwear re­tailer Hot­ter Shoes is the lat­est to beat a hasty re­treat. It is clos­ing all but 15 of its 61 stores, at the cost of 1,000 jobs.

Re­tail­ers com­plain end­lessly about the in­ter­net, un­sus­tain­able rents, busi­ness rates and the weather, but there is no ex­cuse for poor prod­ucts, run­down stores in sec­ond-rate lo­ca­tions and a fail­ure to in­vest in on­line. That’s the re­al­ity for most strug­gling names.

At its heart, retailing is as sim­ple as sell­ing things that cus­tomers want. There isn’t ac­tu­ally any­thing that re­mark­able about Next, it is just very good at get­ting the ba­sics right. Years of in­vest­ment in its digital op­er­a­tions are now pay­ing off. Its stores are a cru­cial part, act­ing as show­room­scum-click-and-col­lect points, and a key out­let for re­turns, al­low­ing cus­tomers to make ad­di­tional or al­ter­na­tive pur­chases.

Mean­while a strat­egy of sell­ing third-party brands has paid off hand­somely, boost­ing sales of Next’s own-la­bel clothes rather than can­ni­bal­is­ing them as the naysay­ers pre­dicted.

The up­shot is not a busi­ness that is ex­actly thriv­ing – even for Wolf­son that would be a stretch – but one that can com­fort­ably with­stand the great­est of shocks. Next con­tin­ues to set the stan­dard for other re­tail­ers.

No walk in the park for Stroll

Lawrence Stroll must won­der if he up­set some­one in a former life. First his res­cue of As­ton Martin was al­most de­railed by a global health emer­gency, then hav­ing pushed ahead with a £560m fundrais­ing any­way, the car­maker needed another £260m cash in­jec­tion just three months later.

As if that wasn’t enough, it has now un­cov­ered an ac­count­ing far­rago at its US arm dat­ing back to 2018, the year that As­ton Martin joined the stock mar­ket, sell­ing shares at £19 a go. The cock-up means that last year’s losses were ac­tu­ally £70.9m com­pared with the £55.6m that had been re­ported.

Still, at least it helped to dis­tract from the main event: another set of rot­ten re­sults. These were much worse than the last ones, un­sur­pris­ing per­haps given the im­pact of Covid-19, which forced it to quickly shut deal­er­ships and fac­to­ries around the world. In the first half, turnover plunged two thirds to £146m and it sold 1,770 cars, a 40pc fall on the pre­vi­ous pe­riod. Pre-tax losses al­most tre­bled to £227m.

“This has been a very in­tense and chal­leng­ing six months,” Stroll said. The art of the un­der­state­ment lives on at As­ton Martin.

Big beasts ready to top up re­serves

First Bri­tish Air­ways, now Rolls-Royce. De­spite suc­cess­fully weath­er­ing the worst of the storm, even the big beasts of the FTSE will need to raise fur­ther funds to get through the next stage of the cri­sis. Both are vic­tims of the se­vere down­turn in travel, ex­ac­er­bated by our own gov­ern­ment’s cack-handed re­sponse.

There has been spec­u­la­tion that min­is­ters will be forced to step in and bail out Rolls but there seems lit­tle chance of that. The Trea­sury has made it clear that share­hold­ers should be the first port of call for strug­gling com­pa­nies.

Ac­cord­ing to re­ports, a £1.5bn cash call looms, though City sources point out that the com­pany burnt through £3bn of cash in the last quar­ter so the even­tual fig­ure is likely to be closer to that. What­ever the amount, it should end all talk of the tax­payer step­ping in.

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