The fashion and homeware brand has issued a stark warning of potential store closures following a significant legal defeat in an equal pay case.
In a legal battle that spanned over six years, the retailer was dealt a blow last month when more than 3,500 past and present employees claimed victory over pay disputes.
An employment tribunal concluded that Next had not convincingly shown that the disparity in base wages between sales consultants and warehouse staff wasn’t due to gender discrimination. Spearheaded by the retailer’s CEO, Lord Wolfson, Next voiced concerns that although it anticipates a successful challenge in its forthcoming appeal, failure could lead to store shutdowns amid escalating expenses.
It follows revelations that the Next boss pocketed £4.5million in pay last year as the retailer’s profits hit a record high of £918m. Meanwhile, the chief executive received a fixed pay of £908,000, with benefits of £36,000 and a £136,000 pension, The Mirror reported.
In its recently announced half-year report, Next cautioned: “In the possible (but unlikely) event we lose this case on appeal, there will be a financial cost to the group and its ongoing future operating costs.”
It went on to explain the company’s approach towards its stores: “Each of our stores is treated as a business in its own right, and must remain individually profitable if they are to open in the first place and continue trading at lease renewal.”
The retailer further warned: “Inevitably some of our stores will no longer be viable if this ruling is upheld on appeal. Materially increasing store operating costs will result in more shops being closed when their leases expire, and will materially impede our ability to open new stores going forward”, reports Somerset Live.
Next bosses aired fears the ruling could “threaten the viability of out [its] warehouse operation” unless it can increase workers’ pay at these sites.
They asked: “If, for many people, warehouse work is less attractive than work in stores… how can a warehouse attract the number of employees it needs? “
Their legal team remains “very confident of our grounds for appeal”; however, they have emphasised that the appeal process might take over a year to resolve.
Next projects an optimistic business outlook as it raises its annual profit forecast for the second time in under two months and anticipates a drop in its prices for autumn and winter collections.
Additionally, the brand recently announced a substantial 7.1 percent rise in underlying pre-tax profits, reaching £452 million for the six months ending July 27.
This financial boost comes amidst an eight percent total group sales increase, though UK sales saw just a one percent uptick, hindered by the Next brand where sales dipped as much as 7.4 percent in June because of the lack of demand for seasonal offerings during a surprisingly cool early summer.
Next revealed a significant 23 percent surge in overseas sales during the first half, and notably mentioned that UK trading since then has been “materially” stronger than anticipated, thanks to more favourable weather conditions over August.
The retail giant saw a 6.9 percent increase in full-price sales during the initial six weeks of the second half, leading to an upward revision of its annual sales growth forecast to four percent, with expectations for a five percent rise specifically in UK retail for the third quarter.
Its full-year profit outlook has been boosted by £15million, projecting a robust £995million – an 8.4 percent increase compared to the previous year.
Furthermore, shoppers feeling the pinch should find some relief as Next announced it is cutting prices even further for its upcoming autumn and winter lines, with a reduction of 0.3 percent following an earlier decrease of one percent in the first half of the year.
