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
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