Next will pass on £15m no-deal Brexit tariff savings to customers

Consumers ‘numb to daily swings in the political debate’, with little evidence uncertainty is affecting demand for clothing, says chief executive and prominent Brexiteer Lord Simon Wolfson said

Next reported a 0.4% dip in pre-tax profits to £722.9m for the year

Next has said it could cut prices after a no-deal Brexit thanks to savings from lower trade tariffs.

The retail giant said it would slash its costs by £15m meaning that “modest” savings could be passed on to consumers.

Next chief executive and prominent Brexiteer Lord Simon Wolfson said consumers are “numb to the daily swings in the political debate”, with little evidence that uncertainty is affecting demand for clothing.

The announcement came as the latest official figures showed retail sales increased 0.4 per cent in February despite surveys suggesting consumer confidence is slipping.

Next reported a 0.4 per cent dip in pre-tax profits to £722.9m for the year to the end of January. A 7.9 per cent slump in high street sales was countered by a 14.7 per cent jump in online revenues.

Lord Wolfson said Brexit was having little negative impact on the business.

He said: “We can see no evidence that this uncertainty is affecting consumer behaviour in our sector.

“Our feeling is that there is a level of fatigue around the subject.”

Lord Wolfson also said despite the Brexit uncertainty, the economic fundamentals affecting consumer behaviour have improved – with better job rates and low inflation.

“Whilst our relationship with the EU remains uncertain, other economic indicators for the consumer look less worrying than at this point last year,” he said.

The company is up against the same set of challenges facing many high street retailers and said it expects to close some of its 507 stores over the next 15 years as it focuses increasingly on web sales.

“Our guess is that there will be shops in 15 years’ time, but they will be fewer in number, possibly smaller and much less expensive,” the company said.

Sophie Lund-Yates, equity analyst at Hargreaves Lansdown, said: “It’s no secret the high street is losing its grip on consumers; sales are sliding everywhere, from department stores to the likes of Superdry.

“With that in mind, Next’s lacklustre in-store sales aren’t a surprise. Therefore, the group’s decision to keep opening new stores may seem counterintuitive, but the retail estate is actually a fundamental element to the success of the business.

“Next has made it clear the future of the business is centred on growth in online sales, but around half of all online orders are done through the click and collect service, and more than 80 per cent of returns are completed in store.

“That means that rather than cutting the amount of physical sales space, Next’s plans for evolution very much embrace bricks and mortar.

“Given Next’s harsh review of the UK’s retail environment, a shift to online seems sensible.

“The issue is that for every £1 of business that’s migrated to online, it’s costing Next an additional 6p, which is part of what’s denting profits. Still, online sales are growing nicely, and while restructuring costs are set to linger for a while yet, Next’s track record suggests it can reach the light at the end of the tunnel.”