Next has changed its outlook on the prospects for bricks-and-mortar stores as more shoppers switch their spend online amid the coronavirus pandemic.
In its seasonal trading update, the fashion retailer predicted a decline in its in-store sales in future, putting into question the status of some of its stores.
Over the nine weeks to December 26, store sales plummeted 43% year on year, while online sales jumped 38%, showing the shift in how consumers have chosen to shop throughout the festive period.
Next said: “In previous years, we assumed that store sales would decline for one more year and remain flat thereafter.
“We now believe this is overly optimistic and we are forecasting annual like-for-like sales declines for the foreseeable future. So we are now providing for store-level losses in shops that we believe will become unprofitable at any point up to the end of their leases.”
Next reaffirmed that shops remain central to the business but has made additional property provisions of £40m.
The provisions may indicate that Next could shutter some stores, as bricks-and-mortar fashion retail continues to suffer during lockdown restrictions.
One City analyst said Next was right to be “conservative” about the outlook given the current situation.
He said while it may only impact a small number of Next stores, this may indicate that some shops in city centres and shopping centre locations, which may not return to sufficient profitability, could be closed in future. As retail navigates the latest national lockdowns, other retailers may well pursue a similar course.
Next said stores in out-of-town retail parks had performed 15% ahead of those in city centres and shopping centres.
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