Retail chain Next has warned it is preparing for a “significant” trading downturn amid the coronavirus pandemic as it braces for a potential £1 billion in lost sales.
The group said the outbreak could see full-year sales plunge by 25% in a worst case scenario and completely decimate sales over some weeks, but assured the firm could “comfortably sustain” the hit.
Next boss Lord Simon Wolfson told the PA news agency the group would keep its 498 stores open, unless the Government advises widespread shop closures.
He said: “As long as the Government feels it is appropriate to keep shops open, we should keep the service available to customers.”
In the event of a prolonged closure period and no government assistance, Next cautioned it may be forced to take “radical” action on wages to help cut costs – including redundancies and forcing staff to take time off.
But the group – which employs around 30,000 people – hopes it can offset a severe trading hit by not requiring staff to work more than their contracted hours and, in the short term, not replacing leavers.
Its recent figures showed the toll taken as Britain has begun to go into lockdown, with high street sales falling by as much as 46% since Sunday.
Sales have declined markedly each week since mid February, with total sales including online down 8.8% last week and 30% so far this week.
Lord Wolfson said online sales are likely to fare better than stores due to social distancing measures, but gave a bleak outlook for trading in the coming months, cautioning that “people do not buy a new outfit to stay at home”.
The comments came as Next reported a better-than-expected 0.8% rise in pre-tax profits to £728.5 million for the year to January as overall full-price brand sales lifted 4%.
Lord Woflson said: “When the pandemic first appeared in China, we assumed that the threat was to our supply chain.
“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.”
Next cautioned that sales could even fall by 100% for as long as a month in its worst case scenario, before gradually improving as the outbreak passes – leaving overall sales 53% lower over the affected period.
But the group said this is seen as an “overly pessimistic” sales scenario and is assuming a 20% fall in annual sales at this stage.