RETAIL PAIN
Next warns of store closures after losing £30million legal battle over staff pay
Plus, we've listed all the other retailers closing stores
HIGH street giant Next has warned of possible store closures after losing a landmark legal case over equal pay.
On Thursday, bosses informed investors that the ruling could affect Next's ability to keep stores "individually profitable," possibly leading to closures.
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Next plans to appeal the ruling, which saw over 3,500 former and current workers win their pay claim after a six-year legal battle.
However, if the appeal fails, Next could be forced to close stores to foot the bill.
Lawyers at Leigh Day estimate that Next will need to pay £30 million in backdated wages to underpaid staff.
In August, an employment tribunal ruled that the retailer must pay its predominantly female store staff the same hourly rates as its mostly male warehouse workers.
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Leigh Day lawyers, representing Next staff, found the pay gap ranged from 40p to £3 an hour, resulting in an average loss of £6,000 per worker.
Next, led by chief executive Lord Wolfson, cautioned that while it is confident of winning the appeal, failure could necessitate store closures due to soaring costs.
The retailer operates approximately 500 stores in the UK and Ireland, along with an additional 206 franchised stores across 33 other countries.
In its half-year results, the group said: "In the possible (but unlikely) event we lose this case on appeal, there will be a financial cost to the group and its ongoing future operating costs."
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It added: "Each of our stores is treated as a business in its own right, and must remain individually profitable if they are to open in the first place and continue trading at lease renewal.
Why are shops closing stores?
"Inevitably some of our stores will no longer be viable if this ruling is upheld on appeal.
"Materially increasing store operating costs will result in more shops being closed when their leases expire, and will materially impede our ability to open new stores going forward."
The firm also indicated that the case could impact the "viability of our warehouse operation" if it cannot increase pay for workers at these sites.
The company said its legal team was "very confident of our grounds for appeal", but stressed the process may not conclude for at least a year.
Last month's ruling marked the first equal pay claim of its type against a national retailer to secure a win and is seen opening the gates to more.
The ruling may spook other major British retailers who are facing similar equal pay disputes, which has cast a shadow over the sector for the past five years.
Leigh Day has similar cases with more than 112,000 store staff across Asda, Tesco, Sainsbury’s, Co-Op, and Morrisons.
The vast majority (60,000) are pursuing a claim against Asda, which has now reached an employment tribunal after being launched 10 years ago.
However, legal experts say that Next's ruling was not legally binding and would therefore not set a precedent for other cases.
SALES UP
Next's comments come as the group upped its annual profit outlook for the second time in less than two months and said prices of its ranges would fall over autumn and winter.
The chain reported a 7.1% jump in underlying pre-tax profits to £452 million for the six months to July 27 as total group sales lifted 8%.
It said UK sales rose by just 1%, dragged lower by its Next brand ranges, which saw sales fall as much as 7.4% in June because of poor demand for seasonal collections amid the cooler early summer weather.
But overseas sales surged 23% in the first half, and the firm also said UK trading since the half-year was "materially" better than expected as the weather improved over August.
Next reported a 6.9% rise in full price sales over the first six weeks of the second half so far and it now expects sales over the year to rise 4% overall, with UK retail growth of 5% in the third quarter.
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The firm upped its full-year profit guidance by £15 million to £995 million, which would mark an 8.4% rise on 2023-24.
The group also offered some cheer for under-pressure consumers as it said prices were being cut further for its autumn and winter ranges, down 0.3% after a 1% fall in the first six months.
NEXT VIP SALE TIPS
THESE tips from a Next employee can help you make sure you bag the best bargains when the sale launches.
- Familiarise yourself with the stock - check in store and online to see what items you might fancy, that means you'll be able to act fast once prices start dropping.
- Check online - often the sale launches online before stores open so go digital to get the best bargains.
- Consider the VIP scheme - if you have a credit account you can get access to the sale before the general public.
- Choose the right store - smaller outlets are likely to be less rammed, so you may have less competition for deals.
- Shop late in the day - around two hours before closing, staff start replenishing stock for the next day, so this is a great time to hit the stores.
- Look at ticket codes - if you're in a Next keep an eye out for black dots on tickets; chances are that means an item is going to be discounted, so you're better off waiting till the price drops.
- Homeware and women's clothing sells fastest - so you might want to get to stores first thing for these items.
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