Next predicts price cuts under no-deal Brexit tariff boost
The clothing chain reported pre-tax profits falling 0.4% to £722.9m for the year to the end of January,
Retail giant Next has said lower trade tariffs under a no-deal Brexit could save it up to £15 million and allow it to cut prices for shoppers.
The chain said, while”seemingly” unlikely, if the Government’s proposed tariffs were put into place it would slash its costs by £12 million to £15 million, allowing “modest” savings to be passed on to customers.
On the impact of a delay to the UK’s withdrawal from the EU, Next chief executive and prominent Brexiteer Lord Simon Wolfson said consumers were “numb to the daily swings in the political debate”, with little evidence that uncertainty is affecting consumer demand for clothing.
The comments came as Next posted a 0.4% dip in pre-tax profits to £722.9 million for the year to the end of January, and forecast a further decline over the year ahead amid “challenging” trading.
Shares fell 3%.
It saw high street sales tumble by 7.9%, but total brand sales lifted 2.6% thanks to a 14.7% jump in online trade.
The group said it expects profits to “marginally” decline by around 1.1% to £715 million over the new financial year ahead, despite forecasting higher sales as online trade is expected to increasingly boost performance.
Lord Wolfson said that, for small ticket purchases such as clothing, Brexit is having little negative impact.
He said: “We can see no evidence that this uncertainty is affecting consumer behaviour in our sector.
“Our feeling is that there is a level of fatigue around the subject.”
Lord Wolfson also said despite the Brexit uncertainty, the economic fundamentals affecting consumer behaviour have improved – with better job rates and low inflation.
“Whilst our relationship with the EU remains uncertain, other economic indicators for the consumer look less worrying than at this point last year,” he said.
In details of its outlook for the sector over the next 15 years, the group also revealed that it expects to reduce its current 507-strong store estate and slash rents to offset the high street gloom and increase focus on web trade.
“Our guess is that there will be shops in 15 years’ time, but they will be fewer in number, possibly smaller and much less expensive,” the group said.
However, it said stores will remain vital to the group and that, even in the worst-case scenario of hefty falls in high street sales of around 10% a year and little reduction in rental costs, some 270 shops could stay open.
Jonathan Pritchard, retail analyst at Peel Hunt, said it was a “perfectly acceptable” set of results from Next.
“Next believes it is well prepared for Brexit and pointed to the high level of employment and rising wages as factors that should support consumer spending,” he said.