By guest author Sahar Nazir from Retail Gazette
- Next warns on coronavirus impact on trading performance
- Sales could tumble by up to 100 % in the coming weeks
- Online sales are likely to perform far better
Next is preparing for a “significant” trading downturn after the coronavirus pandemic takes its toll on the retailer as sales drop 30 % in recent days.
However, the retailer said it could “comfortably sustain” more than £1 billion loss of sales over the full year – including sales declines of up to 100 % in some weeks during the peak of the outbreak.
Online sales are likely to perform better than its 498 stores due to the UK government’s new social distancing measures.
Despite this, Next has cautioned on its outlook for trading in the coming months, saying that “people do not buy a new outfit to stay at home”.
The news comes after Next reported a 0.8 % rise in pre-tax profits to GBP 728.5 million for the year to January as overall full-price brand sales increased four per cent.
“When the pandemic first appeared in China, we assumed that the threat was to our supply chain,” Next chief executive Lord Simon Wolfson said.
“It is now very 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.
“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.”
The final week of January saw Next’s sales rise by 2.1 %, but this dropped by 8.8 % last week and by 30 % since Sunday.
In the event of a prolonged closure period, Next warned it may have to take “radical” action on wages to help cut costs.
However, the fashion retailer hopes it can offset a severe trading hit by not requiring staff to work more than their contracted hours.