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Next warned it would take longer than anticipated for sales to recover once the UK lockdown was eased as it said the hit from coronavirus had been “faster and steeper” than it expected a month ago.
Retailers were facing lower sales “even after full lockdown measures have been lifted”, the company said, in the latest sign of the havoc wreaked on the sector by the pandemic.
The FTSE 100 clothing retailer said that even in the best-case scenario, it was bracing for a 30 per cent drop in full-price clothing sales this year. The fall would be 10 percentage points deeper in the worst-case scenario, according to modelling from a stress test it conducted in March.
Sales of full-price clothing in shops plummeted by 52 per cent between January 26 and April 25 — which included a month of lockdown when shops were closed — with online sales down by close to a third, the company said on Wednesday. Overall, full-price sales fell by 41 per cent in the quarter.
Simon Wolfson, the company’s chief executive, said it was too early to make a call on potential future redundancies. “We should make that decision when we see what the new normal will look like [but] we assume that recovery will be shallow”.
Next reopened its online business two weeks ago in a “very limited” capacity after it was forced to halt its online operation to protect warehouse workers during the coronavirus pandemic.
Its online business is closely tied to its brick-and-mortar stores, as more than half of internet orders are collected in shops.
The group said it planned to prepare its 500 stores for reopening by introducing measures such as screens in front of tills, distance markings on the floor and controlled exit and entry.
Michelle Wilson, analyst at Berenberg, said companies were starting to realise that social distancing measures were likely to be in place long after countries came out of lockdown.
“With social distancing measures in place, it will be physically impossible to have as many people in stores,” she said.
Next has put 84 per cent of its 40,000 employees on government-funded furlough, during which they are paid 80 per cent of their wages. The company said the scheme was “hugely successful in preventing widespread redundancies and hardship”.
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Mr Wolfson praised the government’s support for business but called on it to clarify rules on furloughing for companies that were operating in a limited capacity.
“If people can’t come back to work because they are vulnerable or the sole carer of a child, are they entitled to furlough?” he asked. “Or let’s say we can open to 75 per cent of capacity, which will leave 25 per cent of staff unable to work.”
Mr Wolfson’s pay more than doubled last year, even though he waived his annual bonus to help mitigate the impact of coronavirus. His £2.8m remuneration was largely due to the vesting of a long-term incentive plan.
Next said the modelling it had done for sales this year was not official guidance. “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,” it noted.
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