Next braced for £1.6bn drop in sales this year
Company insists is has ‘strong base from which to weather the storm’
FASHION chain Next could see sales plummet by £1.6 billion this year, it has warned.
With shops remaining shut and town and city centres deserted, the Enderby-based retailer expects to see a drop in sales of 40 per cent this year and an annual pre-tax loss of about £150 million.
Earlier this month, Next announced plans to sell its Enderby headquarters and lease back the premises, generating extra cash for surviving the Covid-19 outbreak. The latest announcement from the company revealed that in the three days before the lockdown was brought in by the Government on March 23, Next’s UK stores made only about 14 per cent of the sales they would normally expect, because people were staying in.
Overall, Next said store sales plunged 52 per cent in the 13 weeks to April 25, its first quarter, while online sales were down 32 per cent.
The retailer, which typically makes more than half of its sales online, was forced to temporarily shut its online operations on March 26 due to fears over the safety of staff in distribution centres.
After a three-week break, it started selling some items online again, including children’s clothes, following improved social distancing measures at its warehouses. It is now selling up to 70 per cent of its range online.
In the trading statement, the firm said: “It is hard to think of a time when the outlook for sales and profit has been more difficult to predict.
“A pandemic of this scale has simply not been experienced by a modern global economy.
“No amount of information about the past can accurately guide us in our deliberations on the future.
“Our job is not to guess exactly how things will pan out but to prepare the company for all outcomes that seem reasonably possible.
“So, the scenarios we set out are just that, scenarios, not guidance, not a forecast.
“Their purpose is to demonstrate how the business is likely to perform under different levels of stress, without seeking to predict which outcome is most likely.
“But these stress tests are more than an academic exercise. They serve to inform the decisions we take about the costs we should save, the cash we need to generate and investments we can afford to make.
“The stress test also serves to demonstrate the financial stability of the group.
“Next’s historic maintenance of healthy margins and high returns on capital have built a strong base from which to weather the storm: even in our worst-case scenario of sales down 40 per cent, the group still is likely to reduce year-end financial net debt.
“Much has changed since we last reported in March. It seems likely that much will change again in the next three months.”