UK clothing chain Next has today forecast a fourth fall in annual profit in a row as it grapples with the sector's structural shift from physical stores to online.
The group today reported a 0.4% fall in pre-tax profit in its 2018/19 financial year and forecast a further 1.1% decline for the following year.
Next trades from more than 500 stores in Britain and Ireland, about 200 stores in 40 other countries and its Directory online business
But it added today that its full-year earnings per share rose 4.5% and are forecast to rise by 3.6% in the current year as Next buys back shares with surplus cash.
Although retail sales fell 7.3% in the year to January 31, compared with a 14.8% rise in online sales, the company continues to expand its store network, with plans for a net 60,000 square feet of additional space in 2019/20.
The company said its stores will remain profitable even if they become less productive.
Next said its full-year pretax profit of £722.9m was in line with company guidance but represented a third annual decline in a row.
For the current year Next forecast full-price sales to increase 1.7%, with an 8.5% decline in retail sales more than offset by an 11% rise in online sales. It forecast profit of £715m.
Next's chief executive Simon Wolfson said the impact of the structural shift should become less of an issue as store operations shrink relative to the size of the online business.
The group has carried out a 15-year stress test on the transition to an online-dominated business.
The test assumes an extreme scenario of like-for-like store sales declining at 10% a year for the next 15 years.
The conclusion of what he described as a very extreme test would be that Next would still have more than 300 shops open, Wolfson added.
Next also said today there is no evidence that uncertainty over Britain's exit from the European Union is affecting consumer behaviour.
With only eight days until Britain is due to leave the EU, the government has yet to agree a withdrawal agreement or an extension, meaning the risk of a disorderly "no-deal" Brexit cannot be ruled out.
Some companies and industry surveys have pointed to UK consumers reining in spending ahead of Brexit, but Next disagrees.
"Our feeling is that there is a level of fatigue around the subject that leaves consumers numb to the daily swings in the political debate," the company said.
Wolfson said he believed that consumer behaviour in Next's sector will be changed materially only if Brexit, or continued uncertainty around it, begins to affect employment, prices or earnings.
"At the moment, the uncertainty over Brexit doesn't appear to be having a negative effect on employment and wages and ultimately those are the things that drive the consumer economy," he told Reuters.
Wolfson is a prominent "Leave" supporter and Conservative peer in the upper house of Britain's parliament.
He said that even with a no-deal Brexit the government's proposed tariff schedule means Next's prices would actually come down by about 1%.
He said Next is prepared for Brexit, whatever the outcome.
