High street retailer Next has issued a warning about potential store closures following a significant legal defeat in an equal pay case. The chain, which reported a 7.1% increase in underlying pre-tax profits to £452 million for the six months ending July 27, is set to challenge a recent ruling that favoured over 3,500 former and existing employees in their pay dispute after a six-year legal battle. An employment tribunal found that Next failed to justify the lower basic wage paid to sales consultants compared to warehouse workers, alleging sex discrimination as the cause.
Next’s CEO, Lord Wolfson, expressed the company’s intention to contest the decision, citing the possible closure of stores due to escalating costs if the appeal is unsuccessful. The retailer highlighted the individual profitability required for each store to remain open and operational, with the ruling potentially rendering some stores unviable. The impact extends to the company’s warehouse operation, raising concerns about its ability to attract sufficient workers if pay rates cannot be adjusted.
While confident in their grounds for appeal, Next acknowledged that the legal process could extend for at least a year. The ruling represents a landmark victory in equal pay claims against major retailers, with implications for ongoing cases, including a similar claim by around 60,000 Asda employees. Despite these challenges, Next upgraded its profit outlook for the year, anticipating a 4% overall sales increase with a rise in UK retail growth for the third quarter.
The retailer reported a positive start to the second half of the year, with a 6.9% uptick in full-price sales and improved trading conditions in the UK driven by favourable weather conditions in August. Next’s decision to lower prices for its autumn and winter ranges aims to support consumer affordability. The chain’s ongoing commitment to adapt to market conditions underscores its resilience amidst legal setbacks and changing consumer trends.
In conclusion, Next’s response to the legal ruling reflects its determination to navigate challenges while focusing on sustaining business operations and customer engagement. The company’s strategic adjustments underscore its proactive approach to adverse developments and commitment to long-term growth and viability in a dynamic retail landscape.