Store closures update: Next warns shops 'will no longer be viable' after legal battle
Next has shared a worrying update for the high street as part of its half-year results
PA
Next has issued a devastating warning to Britain's high streets about possible store closures after losing a legal case over equal pay.
The clothes store is set to appeal against last month's verdict by the court which saw over 3,500 current and ex-employees win their claim after a six-year battle.
In August, an employment tribunal found that Next was unable to demonstrate that the lower basic pay delivered to sales consultants compared with warehouse operatives was not the result of sex discrimination.
Lord Wolfson, the brand's chief executive, warned that Next could be forced to shut down stores due to concerns over costs if the tribunal's ruling remains in place.
However, he noted that the company is confident it will eventually win its appeal in court.
This warning comes amid a wave of store and bank branch closures that have swept communities across the UK and changed the nation's economy.
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The clothes store is sounding the alarm after losing a legal case
PAIn its half-year results, Next outlined the potential fate of many sites unless the appeal is successful.
The company stated: “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.”
“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.
“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.”
According to the firm, the equal pay case could have an effect on the “viability of our warehouse operation” if it now allowed to raise wages for employees working at warehouses.
The group said: “If, for many people, warehouse work is less attractive than work in stores… how can a warehouse attract the number of employees it needs?”
Despite this, Next cited that its legal team remains “very confident of our grounds for appeal”, but noted the process could continue for another year.
This ruling from the employment tribunal represented the first equal pay claim of its type against a UK-wide retailer which has resulted in a win for the plaintiffs.
Analysts have suggested this could open the door for future wins in courts for workers against high street business chains.
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Some Asda workers are also putting forward a similar equal pay claim, which has now reached an employment tribunal after a decade.
These latest store closure comments from Next come after the company revised its annual profit outlook for the second time in under two months.
It confirmed the cost of its ranges would drop over autumn and winter and reporters a 7.1 per cent surge in underlying pre-tax profits to £452million for the six months to July 27, as group sales jumped eight per cent.
UK sales over the period only went up by one per cent due to dead weight of Next brand ranges, which reported sales dropping by as much as 7.4 per cent over the summer.