Next has warned of a hit to January trade from the latest coronavirus lockdown and upped its property provisions, despite a surge in online business over the festive period offsetting tumbling in-store sales.
The company said it had been forced to increase its property provisions by £40m for store impairment and onerous leases, bringing its total provisions for the year to almost £100m.
“We assumed that store sales would decline for one more year and remain flat thereafter,” the company said. “We now believe this is overly optimistic and we are forecasting annual like-for-like sales declines for the foreseeable future. So we are now providing for store-level losses in shops that we believe will become unprofitable at any point up to the end of their leases.”
However, Next expects to make £44m from sale and leaseback of properties over the course of the year, and to benefit from the pandemic-induced business rates reduction for retailers to the tune of £80m.
Online customer numbers rose by 24% year-on-year for the nine weeks to 26 December, while final-quarter online sales surged by 38%.
This counteracted a 43% fall in physical sales, leaving pretax profit for 2020 expected to come in at £370m, up on previous estimates of £365m. Out-of-town retail parks performed about 15% better than stores in cities and shopping centres.
The retailer also said that full-price January sales would also likely fall by one-sixth as a result of fresh lockdown measures announced by prime minister Boris Johnson last night.
Sales are expected to drop by 14% year-on-year because of the lockdown, with nine in every 10 Next outlets forced to close.
The company also predicted that profit for the year ahead would come in at £670m, based on the assumption that physical stores would be closed throughout February and March.
