HIGH STREET GIANT WARNS OF STORE CLOSURES AFTER LOSING £30M LEGAL BATTLE
Next has said it could be forced to close stores after losing a landmark legal battle over equal pay.
The retail giant issued the warning after an employment tribunal ruled last month that Next should pay its store staff, who are predominantly women, the same hourly rates as its mostly male warehouse workers.
This will threaten Next’s ability to make stores “individually profitable”, bosses told investors on Thursday, as they pursue an appeal against the decision.
If unsuccessful, Next could have to pay more than £30m to settle the claim, which was first lodged in 2018 and includes more than 3,500 current and former shop workers.
Next laid out the potential impact of this in its half-year results on Thursday: “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.”
It also warned that the case could have ripple effects across its warehouses, where it will be unable to raise wages without doing so in stores.
The company said: “If, for many people, warehouse work is less attractive than work in stores (as the evidence before the Tribunal showed), how can a warehouse attract the number of employees it needs?”
Lord Wolfson, the Next chief executive, defended the warning on Thursday, telling reporters that the comments were “certainly not a threat” should it lose the appeal.
He said: “We’re not threatening to do anything. It is just pointing out the reality of store openings and closures. You wouldn’t expect a retailer to renew a lease in a shop that’s making a loss.”
Next’s equal pay case is the first of a flurry set to hit UK retailers. The lawyers who represented the female employees in its case are also representing more than 112,000 staff who work across Asda, Tesco, Sainsbury’s, Morrisons and Co-op in similar claims.
Lord Wolfson said the ramifications for some of those businesses would be larger than others.
The comments came alongside Next’s latest set of results for the six months to July, in which it upgraded forecasts for a second time in two months.
The business, which is seen as a bellwether for the retail sector, said it was now expecting profits to come in £15m higher than its previous forecasts for the full year to the end of January. Pre-tax profits are set to come in just under £1bn, it suggested.
The upgrade came after sales that “materially exceeded” its expectations in the first six months of the year.
Revenues were up 13.6pc in the period to hit £2.9bn while profits rose 3.9pc to £432m.
The rise was fuelled by strong growth overseas, where sales jumped by 23pc to hit £433m. Next said there had been a “convergence” of international fashion tastes, with more people watching streaming services such as Netflix, Amazon Prime and TikTok, which was encouraging them to try clothes that were popular in other countries.
The strong financials led to Next shares rising by 6pc in early trading, although it later pared some of those gains and was up just 0.6pc in late afternoon.
2024-09-19T07:36:19Z dg43tfdfdgfd