Fashion retailer Next said the battle to keep high street stores going in an online world was “far from over” as it hiked its profit forecast on hopes of a rebound for consumer spending.
Next delivered the upbeat assessment as it reported a 54% slump in pre-tax earnings to £342m for the year to the end of January as lockdowns took their toll.
Store sales fell 48% to £954m while online sales rose 10% to £2.4bn – and the group expects the trend towards digital will continue even after the pandemic.
Meanwhile, the type of clothes people are ordering has helped Next. Fewer customers have been sent selections of dresses, most of which will be sent back, while more have been stocking up on baby grows, which will not.
Next forecasts another tough year for store sales ahead but has still hiked its annual profit outlook for the current year by £30m to £700m after recent strong trading via its website.
Chief executive Lord Wolfson said there remained “a big question mark over the level of sales our stores will achieve when they open”.
“History has been given a shove and, having moved forward, seems unlikely to reverse.”
But there was still a role for stores in serving customers for online collections and returns while rents have been falling and rivals have been closing, he argued, and even with their sales 20% down on pre-pandemic levels the shops will “remain marginally profitable”.
All those factors “mean that the battle to keep our stores relevant in an online world is far from over”, Lord Wolfson said.
The comments come ahead of a high street reopening later this month which will be notable for the absence some of retail’s biggest brands before the pandemic, which now only exist online – the likes of Debenhams, Topman and Dorothy Perkins.
Next has itself shut 18 stores over the past year and renegotiated rents at 62 while the number of staff employed in the shops has dropped from 24,700 to 21,600 over 2019 and 2020.
Yet it also opened in 11 locations and plans for its net level of space – it had 491 sites at the start of the year – to remain broadly flat over the course of 2021.
Lord Wolfson sounded a bullish note about the months ahead amid predictions that consumers are ready to start splashing out record savings stashed away last year with much of the economy closed.
He said: “Our best guess is that the consumer economy, at least in the short term, will be healthier than many presume.
“It seems likely that a combination of pent‐up demand along with a healthy overall increase in personal savings will serve to keep the consumer economy moving forward.”