Pragmatic Next is better positioned than most to withstand pandemic, says GlobalData

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Following today’s release of Next FY figures for 2019/20, Sofie Willmott, lead retail analyst at GlobalData, a leading data and analytics company, comments: ‘‘Informative and detailed as always, Next’s full year results showed a robust performance in FY19/20 but more importantly a logical approach to the COVID-19 crisis with the retailer still forecasting to generate £55m profit before tax even if annual sales were to fall by over £1bn or 25% in FY20/21– its worst case scenario. Next is the first major non-food retailer to give an indication of the impact on demand so far, aside from announcements from Superdry and Joules that they will suspend financial guidance amidst the uncertainty, and reported this week’s sales to end of day Tuesday fell 30.0% on last year with online sales providing little reinforcement, slumping 25.0%.

“The immediate future does not look bright for any retailer selling non-essential items as consumers, worried about the threat of unemployment and the unknown length of the crisis, cut right back on discretionary spend. Additionally, although only a few retailers such as Selfridges, Sweaty Betty and Urban Outfitters have announced UK store closures so far, more are sure to follow and limited access to physical retail locations, which we forecast accounted for 74.8% of non-food spend in 2019, will severely hit sales. But Next is well placed to outperform considering that its digital channel accounts for over half of total product revenue now and it sells a wide range of categories some of which are likely to be more in demand such as childrenswear, adult loungewear and possibly pyjamas, and homewares. Its Next Unlimited delivery saver scheme will also benefit as consumers utilise delivery services they have already paid for and also choose to spend their cash with retailers they feel more loyal to.

“While many other retailers will be fighting to survive throughout the crisis, Next is determined to keep its planned proposition improvements on track, such as speeding up delivery times for third-party brands, developing an on-site marketing tool and enhancing store processes, so that when demand returns it can offer an even better service. In addition, the retailer is planning to trial its ‘Total platform’ service later in the year, creating a website for a third-party business and giving it access to all of Next’s operations such as warehousing, customer service and marketing, in a similar vein to what Amazon offers brands.”