Next predicts that annual retail decline will become "new normal" as profits fall 55%
A UK fashion retailer has predicted that physical retail stores will remain less popular than their online counterparts as it reports a 55 per cent profit drop.
Next, which has high street stores across the country, reported profit before tax of £324m, dropping more than half of the previous year’s £729m.
The company also reported that its total sales dipped by 17 per cent, falling from £4.4bn in 2019 to £3.6bn in 2020, and reduced its debt to £610m from £1.1bn.
Despite this, it noted that online sales had increased by 18 per cent in the first eight weeks of this year.
Next said: “Retail stores were, and will remain, at a fundamental and irreversible disadvantage to online competition.
“This is not being driven by price or even home delivery, but by the scale of the choice websites can offer relative to any physical store.
“The annual decline in retail like-for-like sales has become the new normal, and looks set to remain that way for many years.”
Michael Roney, chairman of Next, commented: “In last year’s full year results, published just as the UK went into lockdown, we stated that our sector was facing a crisis unprecedented in living memory.
“We also stated that our strong balance sheet and profit margins would allow us to weather the storm. Both statements have proved true.
“We expect the shift in consumer behaviour towards online sales to continue for some time and one of our priorities during the year has been to continue the development of our online platform.
“We accelerated part of our planned capital expenditure in the online business, spending £121m on warehousing and systems.
“I believe that in difficult times there is a clearer separation between the stronger corporate performers and the weaker ones.
“This result is due to the formation of a good management team and the establishment of robust processes during less volatile periods.
“Our continued investment over many years in our people and our systems has shown resilient results in the past year.”
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