You don’t buy a new outfit to stay home
Next boss in stark warning over virus threat
THE High Street is facing its worst crisis since the dark days of the 1970s, according to Next chief executive Lord Wolfson.
The City grandee, who has run the chain for 18 years, said he was preparing for a sales hit of up to £1bn this year – equivalent to a quarter of annual revenue.
As Burberry warned of a huge slump in sales and Harvey Nichols closed its doors, Wolfson said: ‘This is going to be the biggest hit the industry has seen in my 28 years in retail, and probably since the oil crisis in 1973.
‘Online sales are likely to fare better than retail but will also suffer significant losses. People do not buy a new outfit to stay at home.’
Next sales rose 3.3pc in the 12 months to January thanks to pairing rapid growth of its online business with a managed reduction in the number of stores, it said in its full-year results. But the prospect of a 25pc slump in sales this year – which is based on a worst-case scenario that sees stores closed for a month – underlines the threat to less successful High Street firms.
Laura Ashley crashed into administration this week and Joules yesterday cancelled its dividend as it reported a ‘significant fall’ in the number of shoppers visiting its stores.
Fashion house Burberry has also been hit, with chief executive Marco Gobbetti warning ‘the material negative effect of Covid-19 on luxury demand has intensified and is now impacting the industry in all regions’ rather than just in Asia.
Store sales over the past six weeks are down between 40pc and 50pc and the company is predicting a fall of 70pc to 80pc in the second half of March.
Gobbetti said while sales in China have started to pick up following the reopening of most of Burberry’s stores, more than 60pc of its shops in Europe and around 85pc in the Americas are now shut.
Large retailers have been rocked by store closures all over the world. Tourism numbers, which are crucial for city centre locations and the luxury sector, also fell off a cliff last week.
Footfall – a measure of the number of people visiting high streets – was 31pc lower yesterday than the same day last year, according to retail analysts Springboard. On Wednesday it was down 42pc. In London, footfall was down 68pc on Wednesday and 67pc yesterday.
Retailers fear that things will get worse as more draconian measures to stop the virus spreading are introduced.
Wolfson said: ‘When the pandemic first appeared in China, we assumed the threat was to our supply chain. It is now very clear the risk to demand is by far the greatest challenge we face and we need to prepare for a significant downturn in sales for the duration of the pandemic.
‘We have no experience of a similar crisis so there is no way of predicting the effect that coronavirus will have on our sales. It is not yet clear how widespread the virus will be at any one time, how long the pandemic will last and what the medium to long term effect of this pandemic will be on consumer behaviour.’
A group representing retail property giants, including Intu, British Land and Hammerson, wrote to Chancellor Rishi Sunak yesterday demanding support for landlords hit by rent cuts.
Many retail chains are negotiating rent reductions to protect cash reserves and stay afloat, while some have even said they will withhold rent payments.