Shares in clothing and homewares purveyor Next (NXT) nudged 0.3% higher to £46.37 on Tuesday after the retailer reopened its online business, albeit it in limited fashion.
Online is the real growth engine for Next, offsetting the drag from brick and mortar stores, and helped the high street bellwether to deliver better than expected profits in the year to 31 January 2020.
In late March, Next pulled down the shutters on its online business after a growing number of staff at its warehousing and distribution operations expressed concern that they were still being made to work.
GRADUAL RE-AWAKENING
In a short but well-received update today, Next announced it will re-open online ‘in a very limited way’ from today having implemented extensive extra safety measures and consulted with anxious staff and its recognised trade union, USDAW.
Only urgently needed products such as childrenswear and selected small home items will be sold at first, while other products ranges may be added at a later date, in a demonstration of how the business world is being re-ordered by coronavirus.
TAKING BABY STEPS
‘Operations will start with support from colleagues who are willing and able to safely return to work,’ explained Next.
‘The idea is to begin selling in low volumes, so that we only need a small number of colleagues in each warehouse at any one time, helping to ensure rigorous social distancing is complied with.’
To achieve these limited volumes, Next will only allow customers to order the number of items that it believes can be picked safely on any given day.
Once that level is breached, the retailer will then stop taking orders and convert the website to ‘browse only’ until the following morning.
Shore Capital sees the move as ‘a sensible reintroduction of the online operations by Next’.
The broker notes that other clothing retailers have continued to trade their online operations despite shuttering physical shops as part of the government lockdown.
Shore Capital said, ‘John Lewis, Amazon, Marks & Spencer (MKS) (clothing), ASOS (ASC:AIM), Boohoo (BOO:AIM) and Sosandar (SOS:AIM) have all continued to trade over the last few weeks, although it is our view that online order quantities will have been somewhat subdued given the restrictions on going out/cancelled holidays across Europe.
‘It remains to be seen what real appetite there is for online clothing currently given the “stay at home” message and travel restrictions.’
Shore Capital, which withdrew its forecasts and placed its recommendation under review a few weeks back due to COVID-19 uncertainty, also added that ‘the re-opening of the online operations for Next will help generate some limited revenues initially which will aid cash burn in the short term.’
Russ Mould, investment director at AJ Bell, said the update ‘offers a window into what the next few months could be like as the UK comes out of its coronavirus-inspired period of stasis.’
He added, ‘Anyone expecting the economy to crank back into gear overnight is likely to be disappointed as the recovery looks set to happen in slow motion.
‘Next’s decision to gradually ramp up capacity in its online arm looks prudent and suggests it is taking its responsibilities as an employer seriously.’
