March 19, 2020 / 7:23 AM / 17 days ago

UK retailer Next says can sustain 1-billion-pound coronavirus sales hit

LONDON (Reuters) - British clothing retailer Next (NXT.L) said on Thursday it could sustain a hit from coronavirus of more than 1 billion pounds, or 25% of annual sales, without exceeding its debt and bank facilities.

FILE PHOTO: Shoppers walk past a Next store on Oxford Street in London, Britain December 17, 2018. REUTERS/Simon Dawson/File Photo

The group, which has about 700 stores, with about 500 of those in Britain and Ireland, and also operates its online Directory and catalogue business, said uncertainty around the scale, timing and impact of the pandemic means it is impossible to give meaningful guidance for profit in 2020-21.

Next said it was preparing for a significant downturn in sales. Total brand sales were down 30% from March 15-17, with sales at stores down 46% and online down 25%.

Its shares were up 3.1% at 0856 GMT, paring losses for 2020 so far to 44%.

Next noted that to date, homeware and childrenswear sales appeared to be less affected than adult clothing.

The group said online sales were likely to fare better than stores through the crisis but would also suffer significant losses.

“People do not buy a new outfit to stay at home,” said chief Executive Simon Wolfson.

However, he said a long term effect of the virus could be to speed up business moving online.

“We’ve been coping with the transformation from online to stores for many years. There’s a possibility that the coronavirus will accelerate that process,” he told Reuters.

Next said its priorities were to keep its workplaces and shops as safe as possible for customers and staff, securing the cash resources of the business and developing its online platform and product ranges throughout the next six months.

The group said the virus has had some effect on its supply chain, though as yet the only meaningful delays have come from suppliers based in mainland China. Mainland China accounts for 27% of Next’s supply base, excluding third-party brands.

“In reality, the threat posed to the supply of goods pales into insignificance when compared with the potential impact on demand,” Wolfson said.

Next made a pre-tax profit of 728.5 million pounds in the year to January 2020, slightly ahead of guidance, on group sales up 3.3% to 4.36 billion pounds.

Reporting by James Davey; Editing by Kate Holton and Edmund Blair/Emelia Sithole-Matarise

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