“Steeper than anticipated” sales decline puts pressure on Next’s online performance

Retailer Next has conducted a revised stress test after seeing its sales drop more than initially expected due to the ongoing COVID-19 crisis.

In a trading statement this morning, the firm announced it is now modelling lower sales for both the first and second half of the year, with the worst case scenario showing a 40 per cent decrease in sales.

After experiencing a “faster and steeper than anticipated” sales decline, Next has put measures in place to accelerate its capacity to operate online, including reopening its warehouses and assessing staffing levels.

The firm has also made plans for the re-opening on physical stores when the government-mandated lockdown is lifted.

Next commented: “Much will depend on our ability to continue increasing the capacity of our online operations within the constraints of new safe working practices and on the timing of store re-openings.

“It is hard to think of a time when the outlook for sales and profit has been more difficult to predict. A pandemic of this scale has simply not been experienced by a modern global economy.

“Next’s historic maintenance of healthy margins and high returns on capital have built a strong base from which to weather the storm: even in our worst case scenario of sales down -40 per cent the group still is likely to deliver positive EBITDA and reduce year end financial net debt.”