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Next sales drop 'faster and steeper' than expected

Next has warned sales have fallen faster and more steeply than previously expected during “unprecedented uncertainty” created by the coronavirus pandemic.

Full-price retail sales at the high street giant fell by 52% and online sales by 32% in the year to 25 April. The retailer is now anticipating lower sales in both the first and second half of this year.

In a trading update, Next said it has plans in place to reopen stores to comply with social distancing measures, including screening around tills, distance marking on walkways, sanitation stations and entry and exit management systems. It anticipates that it will take “some time” for customers to return to their normal shopping habits and that trade will be very subdued even when stores reopen.

The retailer will prioritise opening larger out-of-town stores first, as it is better able to adapt the layout of large stores to comply with social distancing measures and that larger stores tend to have longer opening hours, reducing the number of customers at any one time.

Next reopened online operations on 14 April, but limited volumes to ensure the safety of warehouse workers. It reached its daily order limit by 8.30 am. Online first opened with only kidswear and a limited homewares range available but the retailer is now offering around 70% of its ranges. It also hopes to increase online capacity to 70% of normal levels over the next two weeks.

Next has reviewed all operating costs and now anticipates making savings of around £120m. The most significant cost savings will come from online and retail marketing, catalogues and photography, where the retailer expects to save £40m, online distribution costs (£35m) and store occupancy costs such as repairs (£18m).

The retailer has also saved around £290m on stock purchases through cancelled orders and identifying stock that can be carried over into future seasons. Next committed to paying suppliers in full and on normal payment terms for orders due to leave supplier factories up to and including 10 April. Orders due after that date are no longer required, and have been cancelled, and Next said compensation payments have been made towards the raw materials that suppliers have acquired. 

The retailer added that it was still selecting ranges and continuing to order stock for later in the year, as customers will still need warm weather products like coats.

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