Coronavirus: Next faces billion-pound sales wipe-out as turmoil hits high street

High street stalwart Next has warned of a potential £1 billion hit to sales it is prepares for a “significant” trading downturn amid the coronavirus crisis.

Next is one of the most familiar and strongest fashion names on the UK high street. Picture: Next plc

The fashion chain said the Covid-19 outbreak could prompt a 25 per cent plunge in full-year sales in a worst case scenario and decimate sales over some weeks, but assured the business could “comfortably sustain” the hit.

It came as Burberry said a majority of its stores in its European and American markets have closed as high streets have been hit in the bid to limit the spread of coronavirus.

Next chief executive Lord Simon Wolfson said the group would keep its 498 stores open, unless the UK government advises widespread shop closures.

In the event of a prolonged closure period and no government assistance, the group 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 chain, which employs some 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.

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 the group reported a 0.8 per cent rise in pre-tax profits to £728.5 million for the year to January as overall full-price brand sales lifted 4 per cent.

Woflson added: “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.”

Adam Vettese, an analyst at investment firm eToro, said: “Like most companies, Next’s shares have suffered heavily as a result of the Coronavirus, crashing 46 per cent in the last month alone.

“However, the popular home and clothing retailer is perhaps one of the big high street names best placed to weather the storm, even if that is not reflected in the share price.

“For a start, nearly half its sales are online, meaning it is not so reliant on its branch network, which will no doubt suffer huge falls in footfall in the coming weeks and months. On top of that it is highly cash generative.

“That’s not to say things won’t be tough. In fact, they will be very tough.”

Burberry said more than 60 per cent of stores in Europe, the Middle East, India and Africa, and 85 per cent of those in the Americas are shut as the battle against the virus continues.

In an earlier-than-expected trading update, the firm warned that its in-store sales were likely to take a 30 per cent hit from the virus in the fourth quarter of the year.