Next flags possible Brexit bonus for shoppers as profits cool

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.

High street sales fell by 7.9%, but total brand sales lifted 2.6% thanks to a 14.7% jump in online trade. Picture: Next

The chain said, while “seemingly” unlikely, if the UK government’s proposed tariffs were put into place it would slash its costs by £12m to £15m, 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.

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The comments came as Next posted a 0.4 per cent dip in pre-tax profits to £722.9m for the year to the end of January, and forecast a further decline over the year ahead amid “challenging” trading.

It saw high street sales tumble by 7.9 per cent, but total brand sales lifted 2.6 per cent thanks to a 14.7 per cent jump in online trade.

The group said it expects profits to “marginally” decline by around 1.1 per cent to £715m 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.”

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 per cent a year and little reduction in rental costs, some 270 shops could stay open.

Arlene Ewing, investment manager at Brewin Dolphin, said: “These results are good but not without difficulty for Next. With such a strong online presence, it’s unsurprising that Next has seen this side of the business continuing to drive revenue streams.

“It has expanded the ‘Next Pay’ customer base of late as well and, as a result, this has contributed well to the company’s progression.

“Despite robust sales, however, profit before tax has declined in line with the guidance issued in January by 0.4 per cent, highlighting that no company seems to be totally bulletproof to the decline of the high street.”