British fashion retailer Next Plc says it could save up to GBP15m in tariffs under a no-deal Brexit – which it would pass on to shoppers via lower prices.
The saving, based on provisional tariff rates released by the British Government last week, would “arise because the proposed reductions in tariffs from countries outside the EU would be more than offset by any increase in tariffs on goods we currently source from the EU and Turkey,” the retailer says.
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“In the medium term, our intention would be to pass on cost price improvements to customers, in the form of better pricing.”
It adds: “Changes to the UK tariff regime will not affect the prices of goods we sell into the EU or other overseas territories.”
The comments came as the retailer this morning (21 March) delivered full-year profits “exactly in line” with its guidance and maintained its forecast for the year ahead.
The company, which is one of the UK’s largest retailers, trading from more than 500 stores in the UK and Ireland, and around 200 stores in 40 countries overseas, said the year to January 2019 was “challenging”, with sales continuing to transfer from stores to online.
In line with forecasts provided in the company’s January 2019 trading statement, group profit for the year was GBP722.9m (US$949.3m), down 0.4% on last year from GBP726.1m.
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By GlobalDataTotal group sales were up 2.5% to GBP4.2bn, while full-price sales climbed 3.1%. Online sales surged by 14.8%, while Next retail sales declined by 7.3%.
Looking ahead, Next said it is maintaining its guidance for the 2020 financial year, and continues to expect GBP715m in group profit before tax, down 1.1% on last year, with full price sales growth of 1.7%.
Online remains Next’s saviour
Kate Ormrod, lead retail analyst at GlobalData, notes despite a “dismal” November and a minor profit warning in early January, Next has managed to get through FY2018/19 fairly unscathed, in comparison to the likes of Debenhams and Arcadia.
“The pressure on the high street continues to mount, and while the Next business is being propped up by its impressive online division, which accounts for 46.5% of brand revenue, its retail operations continue to struggle,” she adds.
“While the weakness of its bricks-and-mortar proposition would leave many thinking its private label offer was uncompelling, full price online sales of Next’s own brand range rose 8.3% in the UK, demonstrating that there is clearly still appetite. There is significant opportunity to mop up sales from the likes of M&S and Debenhams, but there remains room for improvement in terms of design and fashionability in order to drive appeal among the under 40s, ensuring these customers are buying for themselves, not just their kids.”
Unlike many, Ormrod says, Next feels more confident about the year ahead despite the ongoing Brexit saga – no doubt “owing to the fact that the retailer is well-primed for the challenges ahead.”
However, while Next notes that shoppers are fatigued by Brexit indecision, the company says it has seen “no evidence that the uncertainty is affecting consumer behaviour,” and believes other economic indicators such as employment and wages “look less worrying” compared to last year, Ormrod adds.
