Next Chief Blames Incompetent Councils For Failing to Regenerate High Streets

The head of fashion chain Next has blamed "incompetent" local councils, who are resistant to change for the grim state of some of the country's high streets, as he revealed "quiet" trading since January.

Lord Wolfson, a Conservative peer and government adviser, said: "There is a big opportunity to grow retail in the UK by providing people with better shops. [There are] many towns and cities where the stock of shops is inadequate.

"Some high streets have been neglected for 20 or 30 years and those are the ones that will die."

As Britain's only new shopping centre to open this year, Trinity Leeds, launched in the heart of the Yorkshire city on Thursday, Wolfson said councils prepared to allow "dramatic improvement" to their high streets could thrive.

"Some councils are incompetent, painfully slow or just don't want change. It is not about the [political] colour of the council – it is about their approach to growth."

He said Next's store opening programme was being held back by difficulties in getting planning permission and it would now be more aggressive in fighting council decisions.

"In areas where councils traditionally have got away with saying 'no', we will be more active in harnessing the law and the full weight of public opinion to campaign for growth."

Wolfson was speaking as the 536-store fashion and homewares chain said sales growth was running at only about 1% – a slide back from the 3.9% enjoyed in the final quarter of 2012.

He blamed the miserable spring weather and a squeeze on shoppers' disposable income, but said it was too early to tell whether it was the wider economy or the unseasonable chill that was having more impact.

He predicted Next's sales would rise by between 1% and 4% this year and did not expect shoppers to spend more freely until at least halfway through 2014.

Despite the sluggish economy, Next thrived last year, enjoying a 9% rise in profits to £621.6m as sales rose about 3% to £3.5bn in the year to January. Most growth came online where sales increased 9.5% and profits increased 15% over the year.

Profits were also lifted by £64m of cost savings, partly as a result of reducing warehouse and distribution costs and tricks such as re-scheduling staff rotas.

Next also benefited from a one-off gain of £42m by capping the salary on which the future pensions of the 1,000 staff in its final salary scheme would be paid.

Those savings offset a £29m hit from falling sales at stores open for more than a year. Although Wolfson expects sales to continue to fall at those stores, he insisted that Next would continue to open more high street and out of town outlets.

New stores contributed £26m to profits last year and the company said the high street was integral to the success of its online business, with internet shoppers picking up a fifth of their purchases in stores.

Simon Irwin, a retail analyst at Credit Suisse, said it was hard to fault Next's strategy as it out-performed rivals such as Marks & Spencer.

"They have adapted their business model fantastically well. It is increasingly not right to look at the internet and stores in isolation as long as they are getting overall growth."

Next plans to have about 23,000 sq m (250,000 sq ft) of new space by early 2014, on top of its existing 600,000 sq m of shop space.

About half of new space planned in the next three years will be made up of its large "department stores".

The company wants to have 25 of the 5,000 sq m outlets – the same size as a supermarket superstore – by 2016. It has two of these huge shops at present.

Wolfson said the risks of sticking with the high street were relatively low as landlords were now prepared to accept lower rents and shorter leases.

Meanwhile, Next is developing its online business with new services and investment in overseas sites. International online sales rose 59% to £54m last year and are expected to increase by a further 38% this year.

Powered by article was written by Sarah Butler, for The Guardian on Thursday 21st March 2013 20.33 Europe/London © Guardian News and Media Limited 2010


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