High street giant Next has warned of possible store closures after losing a landmark legal case over equal pay.
On Thursday, bosses told investors the ruling could affect Next’s ability to keep stores “individually profitable”, which could lead to closures.
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The company also said the case could have an impact on the “sustainability of our warehouse business” if it could not increase pay for workers on the construction sitesCredit: PA
The next plan is to appeal the ruling, which saw more than 3,500 former and current workers win their back pay claims 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 Next will have to pay £30m back to underpaid staff.
In August, an employment tribunal ruled that the retailer must pay its predominantly female staff the same hourly rate as its predominantly male warehouse workers.
Leigh Day solicitors, who are representing Next staff, found the pay gap ranged from 40p to £3 an hour, resulting in an average loss of £6,000 per worker.
Then, led by chief executive Lord Wolfson, he warned that while he was confident he would win the appeal, failure could mean store closures due to huge costs.
The retailer operates approximately 500 stores in the UK and Ireland, along with a further 206 franchise stores in 33 other countries.
In its half-year results, the group said: “In the possible (but unlikely) event that we lose this case on appeal, the group will incur a financial cost and ongoing future operating costs.”
It added: “Each of our stores is treated as a business in its own right and must remain individually profitable if it is to open at all and continue to trade with a lease extension.
Why are stores closing up shop?
“It is inevitable that some of our stores will no longer be viable if this ruling is upheld on appeal.
“The material increase in store operating costs will result in more stores closing after their leases expire and will significantly impede our ability to open new stores in the future.”
The company also indicated that the case could affect the “viability of our warehouse operations” if it cannot raise wages for workers at those locations.
The company said its legal team was “very confident in our grounds for appeal”, but stressed that the process may not be concluded for at least a year.
Last month’s ruling marked the first equal pay claim of its kind against a national retailer that secured victory and is seen opening the door for more.
The ruling could scare off other major British retailers facing similar disputes over equal pay, which have cast a shadow over the sector over the past five years.
Leigh Day has similar cases with more than 112,000 store staff across Asda, Tesco, Sainsbury’s, the Co-Op and Morrisons.
The vast majority (60,000) are launching a claim against Asda, which has now reached an employment tribunal after being launched 10 years ago.
However, legal experts say the Next ruling was not legally binding and therefore would not set a precedent for other cases.
SALE
Next’s comments come after the group raised its annual profit outlook for the second time in less than two months and said prices across its range would fall over the autumn and winter.
The chain reported a 7.1% jump in underlying pre-tax profits to £452m for the six months to July 27 as overall group sales rose 8%.
He said UK sales were up just 1%, dragged down by the brand’s Next range, which saw sales fall as much as 7.4% in June due to weak demand for seasonal collections amid cooler weather at the start of summer.
But overseas sales rose 23% in the first half, and the company also said UK trading was “materially” better than expected for the half-year as the weather improved during August.
Next reported a 6.9% rise in full price sales in the first six weeks of the second half to date and now expects sales to rise 4% overall for the year, with UK retail sales up 5% in the third quarter.
The company raised its full-year profit guidance by £15m to £995m, which would mean growth of 8.4% compared to 2023-24.
The group also offered some cheer for consumers under pressure as it said prices were further cut for the autumn and winter ranges, down 0.3% after falling 1% in the first six months.
THE FOLLOWING TIPS FOR VIP SALES
THESE tips from Next employees can help you make sure you have the best deals when the sale starts.
- Get to know the stock – check in store and online to see which items you might like, this means you’ll be able to act quickly when prices start to drop.
- Check online – sales often launch online before stores open, so go digital to get the best prices.
- Consider the VIP scheme – if you have a credit account, you can get access to sales before the public.
- Choose the right store – smaller outlets are likely to be less busy, so you may have less competition for deals.
- Shop late in the day – around two hours before closing, staff start restocking for the next day, so this is a great time to hit the stores.
- Look at the ticket codes – if you’re in Next, look out for the black dots on the tickets; chances are high that this means the item will be discounted, so it’s better to wait until the price drops.
- Housewares and women’s clothing sell the fastest – so you should go to the stores first to pick up those items.
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Source: HIS Education