Next calls for landlords to remain ‘pragmatic’ on rents

British fashion retailer Next said it will retain stores as long as landlords continue to be pragmatic on the rents they charge.

The fashion chain said profits for the last year were slashed by more than half after its stores were shut for large parts of it.

However, the group also raised its profit forecast for the current year, as it hailed soaring online sales in the past eight weeks.

“As they have been so far, if landlords continue to be as pragmatic in determining rents going forward then that will allow shops to stay open,” chief executive Simon Wolfson said.

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Next told investors on Thursday that online sales over eight weeks from the start of February were “stronger than expected” and more than 60 per cent ahead of the same period two years ago.

The retailer said it is therefore expecting to post a pre-tax profit of £700 million for the current financial year, up from its previous target of £670 million.

Outlining its outlook for the year, the group said it believes the consumer economy, at least in the short term, “will be healthier than many presume”.

Mr Simon Wolfson said it seems likely that a “combination of pent-up demand along with a healthy overall increase in personal savings” will help to buoy consumer spending.

The group said it is also working on the assumption that vaccine rollout will mean that its stores will remain open for the rest of the year.

However, it said it is unlikely to meet its sales and profits guidance for the year if this does not prove correct.

Next’s 11 stores in the Republic have been shuttered under Level 5 Covid restrictions, with click and collect services also suspended.

Next said that its group pre-tax profits slid by 54 per cent to £342 million for the year ending in January, compared with the same period last year.

It said this slump was driven by Covid-19 costs and lower sales due to lockdown restrictions, with group sales dropping by about 17 per cent to £3.6 billion for the year.

In a statement, Next chairman Michael Roney said: "I believe that in difficult times there is a clearer separation between the stronger corporate performers and the weaker ones.

“This result is due to the formation of a good management team and the establishment of robust processes during less volatile periods.

“Our continued investment over many years in our people and our systems has shown resilient results in the past year.”

Next is targetting growth with its Total Platform business, which aims to use the Next Online infrastructure and provide partners with an online trading platform, with Next handling the website, call centres, warehousing, distribution, returns and retail services.

The company currently has Total Platform contracts with five clients, including Laura Ashley, Victoria’s Secret UK and Reiss.

The recent blockage of the Suez Canal has delayed the arrival of about 2 per cent of its stock, Mr Wolfson said. “It’s a problem but not a big problem. It’s delayed about 2 per cent of our stock by three weeks,” he said. “The bottom line is we don’t expect the Suez blockage to have a material impact on sales over the next two or three months.”

Next on Thursday joined a growing list of European clothing retailers suspending new production orders with factories in Myanmar in the wake of February’s military coup. Myanmar has been rocked by protests since the army overthrew the elected government of Nobel laureate Aung San Suu Kyi on February 1st citing unsubstantiated claims of fraud in a November election. At least 536 civilians have been killed in protests, 141 of them on Saturday, the bloodiest day of the unrest, according to the Assistance Association for Political Prisoners (AAPP). Myanmar is known globally for its yarn, fabric and textile products, and its garment industry is a key source of jobs.

“We’re not placing any more orders at the moment, that is a big step,” Mr Wolfson told Reuters. “We don’t source a lot of our product from Myanmar but most of the stock that we were sourcing from Myanmar...we have alternatives in place already for that stock in other countries.” Mr Wolfson said Myanmar provided less than 5 per cent of Next’s total stock.– PA, Reuters