By Kristy Dorsey
Retail giant Next is cancelling its dividend and share buyback programme to save £480 million as sales have fallen “faster and steeper” than feared just a month ago.
First quarter sales during the 13 weeks to April 25 fell by 38%, reflecting the closure of all of its stores during lockdown and a temporary shutdown of online operations. Store sales during the period were down by 52%, with online sales 32% lower.
In an effort to prepare for every eventuality, planning is now based on scenarios in which full-year sales fall by anywhere between 30% and 40%. This represents a significant deterioration from the worst case scenario of a 25% decline when Next last revealed its stress test results in March.
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Chief executive Simon Wolfson said there was no way the company or the Government could predict when stores might begin to re-open. But when that time does come, Next said its larger out-of-town sites will be the first to resume trading, as these are best suited for implementing social distancing measures such as those being deployed by supermarkets.
Next has approximately 40 stores in Scotland, of which 14 fall into the larger out-of-town category.
Regardless of how soon retail outlets might begin to resume trading, Next is predicting that sales will remain supressed through the autumn and winter season. It has warned that it could suffer losses of up to £150m, compared to last year’s profits of nearly £600m.
“We anticipate that it will take some time for customers to return to their normal shopping habits and that sales will be very subdued when trade commences,” the company said in its latest market update.
READ MORE: Scotland's retailers endure 'shocker' of a month amid coronavirus fallout
To shore up its reserves, Next has cancelled its dividend due to be paid in August, adding it is “highly unlikely” that one will be paid in January. It is raising a further £155m though sale and leaseback deals, and has saved £290m by cancelling stock orders.
Approximately 84% of staff remain on furlough, down from a peak of 88% before Next was able to partially re-open its warehouse picking operation on April 14.
“It’s hard to think of a time when the outlook for sales and profit has been more difficult to predict,” the company said. “A pandemic of this scale has simply not been experienced by a modern global economy.”
The retailer will issue its next trading update on July 29.
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