Next details reopening plan amid T-shirt glut
Next has set out plans to reopen its shops after any easing of lockdown measures. The fashion retailer will prioritise larger, out-of-town stores, where social distancing can be more easily implemented.
It anticipates that “it will take some time for customers to return to their normal shopping habits.” As part of its preparations, it is cancelling orders for some products and selecting stock for later in the year.
In a trading statement on Wednesday, it said: “There is no point in not buying coats because we have too many t-shirts!” The retailer closed its High Street stores on 23 March – one day before all non-essential shops were told to close by the government.
Sophie Lund-Yates, equities analyst at Hargreaves Lansdown, said: “Shop closures mean Next’s inventory levels have reached the point that it’s had to draft in the use of additional storage facilities.”
She added: “This is a tricky spot to be in, because no retailer wants a huge pile of clearance items at the best of times.
“With trading expected to be subdued for a while even after lockdowns are lifted, shifting all the extra summer t-shirts is going to be a more difficult task than usual.”
Once any restrictions on non-essential retailers, such as clothing stores, have been lifted, the Leicestershire-based firm says it will focus on reopening its shops in retail parks.
These larger stores tend to be open for longer hours, which tends to mean there are fewer people in the shop at any one time.
Managers will also have additional space outside, where customers will be able to queue.
Next says it will add other safety measures, such Perspex screens to separate workers and customers at the tills, distance markings on the floor and hand sanitiser stations.
Richard Lim, chief executive of Retail Economics, said: “Understandably, consumers will remain anxious about shopping in crowded locations.
“Shopping has always been a social event, but new restrictions on our movement and personal interaction risk undermining the experience.”
“The key question is whether consumers will be confident enough to return to shopping destinations when stores begin to reopen and whether the level of demand will be strong enough to make it commercially viable.”
Sales ‘difficult to predict’
Next’s annual update to investors on Wednesday also warned that full-price sales in-store and online could drop by up to 40%, with shoppers kept away during the coronavirus pandemic.
It said that it was hard to think of a time when sales and profit had “been more difficult to predict”.
In the three days before non-essential shops closed, in-store sales plummeted by 86%.
The Leicestershire-based firm said: “In reality, the majority of our customers had decided to stop shopping in retail stores before the order came to close them.”
Next said store sales plunged 52% in the 13 weeks to April 25, its first quarter, while online sales were down 32%.
The retailer, which typically makes more than half of its sales online, was forced to suspend its online operations on 26 March.
After a three-week break, the firm started selling some items online including children’s clothes, following improved social distancing measures at its warehouses.
It says it has since increased the number of products available, with up to 70% of its range now online.
It has put shopping limits in place to protect workers. Once a certain number of orders has been placed, the website now becomes “browse-only”, to ensure those workers can cope.
The firm initially furloughed just under 90% of its staff, the vast majority being from stores and warehouses that were closed. It says that has now dropped to 84% as online sales have picked up.
On Wednesday, Dixons Carphone also reported strong online sales as shoppers stay at home.
The electronics company said that online trading had recovered about two-thirds of lost in-store sales in the UK.
Overall, sales were up by 1% in the year to 25 April, with a 22% increase in online transactions.
For Next, however, as lockdown continues “it will need to continue to improve its digital infrastructure and capacity to take and deliver orders if it is to maintain pre-Covid-19 trading levels,” according to Julie Palmer, partner at Begbies Traynor.
In April, the British retailer also put its headquarters and warehouses up for sale in a bid to secure its future.
The firm appointed two agents to sell its head office at Enderby in Leicestershire and three of its warehouses in West Yorkshire. It hopes the sales will raise up to £100m.