Next boss raises alarm on home work­ing flaws

Next’s trad­ing up­dates are a breath of fresh air. Even in a cri­sis of this scale, there’s a nat­u­ral sense of zen that em­anates from them

The Daily Telegraph - Business - - Front Page - By Pa­trick Sawer and Si­mon Foy

WORK­ING from home has robbed staff of the joy of spon­ta­neous con­ver­sa­tion and the chance to learn from each other, Next chief ex­ec­u­tive Lord Wolf­son has warned.

The cloth­ing re­tailer’s boss yes­ter­day is­sued a damn­ing as­sess­ment of the home work­ing the pan­demic has forced on hun­dreds of thou­sands of em­ploy­ees, ar­gu­ing that the use of video plat­forms such as Zoom had trans­formed “meet­ings from pro­duc­tive ex­changes of ideas into bor­ing, one-way lec­tures, with the ‘pre­sen­ters’ rat­tling through bul­let points al­ready vis­i­ble to their stul­ti­fied au­di­ence”.

Lord Wolf­son con­ceded home work­ing had al­lowed em­ploy­ees to fo­cus more ef­fec­tively on some soli­tary tasks, with some even find­ing the switch lib­er­at­ing.

His com­ments came as Next re­ported a mod­est £9m pre-tax profit for the six months to July, de­spite rev­enue de­clin­ing by a third to £1.29bn af­ter trad­ing proved to be bet­ter than expected post-lock­down.

The re­tail bell­wether said its cen­tral sce­nario now as­sumed full-year pre-tax prof­its of £300m, up from the £195m it forecast in July. In the last seven weeks, full­price sales rose 4pc on last year, driven by cool weather and fewer over­seas hol­i­days, as foot­fall re­mained rel­a­tively high at its stores on re­tail parks. The ro­bust per­for­mance was driven by Next’s on­line busi­ness.

Lord Wolf­son added: “Stand­ing as we are, in the midst of the pan­demic, with no sign yet of abate­ment or vac­cine, it might seem odd that the es­sen­tial tone of

this re­port is op­ti­mistic.

“The prospects for the next six months re­main as un­cer­tain as the out­look for the virus it­self: never has our guid­ance been more ten­ta­tive or as broad in its pos­si­ble out­comes but in all our guid­ance sce­nar­ios, the group gen­er­ates a profit, gen­er­ates cash and re­duces its debts.”

Shares jumped 4.1pc to £64.26, valu­ing the com­pany at £8.5bn.

Just when the world seemed to be hope­lessly spin­ning out of con­trol, up steps Next’s Si­mon Wolf­son in full Su­per­man re­galia with some timely re­as­sur­ance. Much of his calm de­meanour must come from ex­pe­ri­ence. The dot­com boom; 9/11; the fi­nan­cial crash – as one of cor­po­rate Britain’s long­est-serv­ing bosses, his Lord­ship is an old hand at crises. It is surely no co­in­ci­dence that Next can boast both board­room longevity while con­sis­tently out­do­ing the com­pe­ti­tion.

But there’s a nat­u­ral sense of zen that em­anates from the re­tailer’s trad­ing up­dates, even in a cri­sis of this scale.

In a world of in­creas­ingly in­fan­tilised cor­po­rate com­mu­ni­ca­tions, Next’s state­ments are a wel­come breath of fresh air, com­bin­ing nu­ance and con­ci­sion, to help cre­ate what must surely be Britain’s best run re­tailer, with JD Sports and Dunelm not too far be­hind.

The re­sults speak for them­selves. Guid­ance has been up­dated again with pre-tax profit for the year now expected to be in its “cen­tral” sce­nario at £300m, a big jump from the £195m it es­ti­mated two months ago, which was al­ready a se­ri­ous up­grade on City fore­casts.

Sure, turnover was down by a third in the six months to July, but over the last seven weeks, sales have ac­tu­ally been above last year’s lev­els. Re­peated in­vest­ment on­line has paid off, and its more spa­cious re­tail park stores have ex­pe­ri­enced a mini-re­nais­sance, mak­ing up for a slump in city cen­tre shops.

The finances are in good shape too: nearly £500m cut from net debt; and a £1bn cus­tomer credit book that has “seen no de­te­ri­o­ra­tion in bad debt rates or any ex­ten­sion in pay­ment days” de­spite the strain on house­hold bud­gets.

But the num­bers are al­most a sideshow. It’s the foren­sic anal­y­sis that stands out, re­as­sur­ing share­hold­ers that Next re­mains in safe hands. Af­ter an­other 3pc rise, its shares have climbed 87pc since April’s Covid lows of 3,390p.

As Wolf­son says, Next’s fi­nan­cial re­ports have “be­come more than just a means of com­mu­ni­cat­ing our per­for­mance, they are an in­trin­sic part of plan­ning and lead­ing the or­gan­i­sa­tion”.

Its as­sess­ment of work­ing from home, for ex­am­ple, is so clearly thought out, it should be­come the re­quired blue­print for ev­ery com­pany. Es­sen­tially it is this: some things work bet­ter, some are worse; it will vary by job and de­part­ment; but we will work our way through it.

Wolf­son con­cludes that it has to be bot­tom up, it can’t be driven by a one size fits all board­room de­ci­sion. The chain trusts em­ploy­ees to find where the bal­ance lies and if you trust em­ploy­ees to do that, then surely you end up with a bet­ter so­lu­tion than if it was done by edict from head of­fice with every­one or­dered back to their desks.

And yet, some of it, he freely ad­mits, may not even be ac­cu­rate and per­haps that’s the key dif­fer­ence. One of Next’s great­est strengths is that it is not afraid to treat staff, share­hold­ers, and cus­tomers like grown-ups.

‘It must be Britain’s best run re­tailer, with JD Sports and Dunelm not far be­hind’

White has come out fight­ing

What Sharon White would give to be in Si­mon Wolf­son’s shoes for a day. Dame Sharon had a fight on her hands to turn around the John Lewis part­ner­ship be­fore the pan­demic. Now, it has turned into a full-blown scrap.

She’s putting on a brave face though. Re­sults “high­lights” in­clude 2.5m cus­tomers a week served, and 25pc of home de­liv­ery slots set aside for the vul­ner­a­ble – all good stuff for a part­ner­ship that states “pur­pose is fun­da­men­tal to ev­ery­thing we do”.

Still, the own­er­ship model is clearly both a bless­ing and a curse. White points out that its “long-term view” means that it only has to make “suf­fi­cient” not “max­i­mum” profit, but you can’t help but won­der if some of the tougher de­ci­sions would have been made sooner in a more com­mer­cial or­gan­i­sa­tion.

But at least the pan­demic has fo­cused minds. Next year’s bonus has been axed for the first time in 70 years and the re­tailer has swung from a £192m profit last year to an eye-wa­ter­ing £635m pre-tax loss, on the back of a gi­gan­tic £580m store write­down.

The un­der­ly­ing num­bers are not nearly as bad: a £55m half-yearly loss, “cred­itable” it pleads, given that it was about the same last year. And White points out sev­eral pos­i­tives: strong on­line growth at John Lewis meant over­all sales were only down 10pc; and Waitrose is in good shape with like-for-likes sales up 10pc on last year.

The cri­sis has put a turbo-booster un­der change too, with store clo­sures be­ing speeded up and oth­ers re­pur­posed, and a dizzy­ing num­ber of mostly promis­ing new ven­tures be­ing ex­plored.

And amid the scary head­lines it’s easy to for­get this is a busi­ness that made nearly £5bn of turnover, has more than £2bn of liq­uid­ity, and could yet post a small profit for the year. It’s clearly no Next but it’s no BHS ei­ther.

Lord Wolf­son, chief ex­ec­u­tive of Next, has crit­i­cised the cul­ture of video meet­ings cre­ated by home work­ing

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