Next achieved group sales of £4.2bn for the year to 25th January representing a 3.3 per cent rise over the previous year. Online sales had risen by 11.9 per cent to reach £1.9bn which the business attributed to improved availability of stock as well as swifter processing of customer returns. Its Label Brands division achieved turnover of £510 million which was 23 per cent up on last year and returned a net margin of 15 per cent.
It was the retailer’s store division that fared less well with an in-store sales drop of 5.3 per cent to £1.95bn. It had focused on speeding delivery into its stores and had, overall, suffered a less dramatic downturn than other high street store businesses. Its overall profit before tax was up by 2 per cent to reach £734 million.
Commenting, CEO Lord Wolfson said that the business had implemented a coronavrius stress test to give it the likely impact for several levels of sales decline and that this would inform on measures to control costs, delay capital expenditure and dividends.
“When the pandemic first appeared in China, we assumed that the threat was to our supply chain. It is now clear that 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,” said Lord Wolfson. We have no experience of a similar crisis so there is no way of predicting the extent that the effect of coronavirus will have on our retail and online 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.”
“The evidence we have from sales to date in the UK and from our (small) international websites in the worst affected countries is that demand will be the biggest issue and although the virus is likely to impact our operations, we do not believe this will be as damaging as the very significant drop in sales sustained both in retail and online. 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. There is some evidence from our overseas sites that as restrictions on movement increase, the difference between online and retail sales performance widens, with online picking up a small amount of the business that cannot be carried out in-store. Some product areas are likely to fare better than others. To date, our homeware and childrenswear sales appear to be less affected than our adult clothing lines.”
Note: since closing its retail stores the business has endeavoured to home deliver all Click & collect orders placed by customers.
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