Next warns of store closures after losing £30million legal battle over staff pay
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 will impact Next’s ability to keep stores “individually profitable” and could result in store closures.
Next plans to appeal last month’s decision, which saw over 3,500 former and current workers win their pay claim after a six-year legal battle.
If the appeal fails, Next could be forced to close stores to foot the bill if the ruling is upheld.
Lawyers at Leigh Day estimate that Next will need to pay £30 million in backdated wages to underpaid staff.
It comes after after an employment tribunal ruled last month that Next must pay its predominantly female store staff the same hourly rates as its mostly male warehouse workers.
Lawyers at Leigh Day, representing Next staff, found the pay gap ranged from 40p to £3 an hour — adding up to a loss of £6,000 on average.
Next – which is led by chief executive Lord Wolfson – cautioned that while it is confident of winning its appeal, if it did not, it could be forced to shut shops 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.”
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.
“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 said that the case could have an impact on the “viability of our warehouse operation” if it cannot increase pay for workers at the 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 similar claim against Asda, which has now reached an employment tribunal after being launched 10 years ago.
However, legal experts note 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.
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.