Next to cut prices in event of no-deal Brexit as half-year sales & profit rise

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Next to cut prices in event of no-deal Brexit as half-year sales & profit rise
Next's online growth continued to offset its high street woes.
// Next reports 2.7% rise in overall pre-tax profits to £319.6m for the half-year, as well as a 3.7% uptick in total sales
// However, it reported a 4.9% fall in like-for-likes across physical stores, but online sales jumped 12.6%
// Operating profit in Next’s physical retail arm dropped 23.5% while online profit grew 8.4%
// Next boss Lord Wolfson has also said prices will be cut by 2% in the event of a no-deal Brexit

Next’s boss has insisted prices will be cut by around two per cent in the event of a no-deal Brexit, as the retailer unveiled an increase in overall half-year sales and profits as online growth continued to offset high street woes.

Next chief executive Lord Simon Wolfson – an outspoken Brexiteer – said the government’s temporary tariff regime means the UK crashing out of the EU would likely reduce the retail giant’s import duty costs by about £25 million, which it would pass on to customers.

He told the PA news agency that these cuts would probably be seen in shops from January onwards, although he stressed he would rather a deal was secured before the Brexit deadline of October 31.

“Britain is in a much better place today than it was in the run-up to the March deadline,” he said.

However, he said the biggest risk remained the potential for gridlock at ports and urged the government to publish its plans to keep the flow of UK imports and exports moving in the event of a no-deal Brexit.

He made the remarks as Next reported a 2.7 per cent rise in overall pre-tax profits to £319.6 million for the half-year period ending July, as well as a 3.7 per cent uptick in total half-year sales to £2.05 billion.

However, the fashion and home furnishings chain saw like-for-like sales across its 499 bricks-and-mortar stores fall by 4.9 per cent year-on-year – which it said was better than feared.

Total sales from Next’s store estate fell by 5.5 per cent year-on-year to £874.3 million, and operating profit in the same division plunged 23.5 per cent year-on-year to £56 million.

“The weight of rent, rates and service charge costs remain stubbornly fixed in the stores where the leases have yet to be renegotiated,” Wolfson said.

He added that rents on those being renegotiated were coming down sharply, which means it will only shut six shops this year, fewer than the 13 it had originally expected.

The physical retail woes were offset by a 12.6 per cent year-on-year jump in Next’s online arm, which generated £1 billion in half-year sales.

Operating profit from online also grew, coming in £177,1 million compared to last year’s £163.3 million – an 8.4 per cent uptick.

Next warned that autumn trading so far had been “disappointing”, which was likely to lead to a weaker third quarter – but it put this down to warm weather rather than Brexit uncertainty.

Wolfson said Next remained on track for a 0.3 per cent rise in profits over the full year to £725 million and overall full-price sales growth of 3.6 per cent.

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