Sep 14, 2017

Next has cash generation in store to solve existential crisis

"It might seem counterintuitive to open shops if there is to be a prolonged downturn on the high street. However . . . even in a world of declining like-for-like sales, a new store is likely to generate significantly more cash than we invest in it". Running store chains for cash, even as sales decline, can be a successful strategy - as WH Smith, if not those other butts of the joke, can prove. Lord Wolfson republished projections showing that even if same-store sales fell at 6 per cent a year for a decade, cumulative cash generation would be £1bn - enough to cover overheads assuming rent and fixed costs also fall in such an environment, and new stores outperform closures. Store sales appear to be declining faster than 6 per cent already. Lower sales are not making costs easier to cut: the retail operating margin worsened by 3.4 percentage points because fixed costs increased as a percentage of sales.

Read the full story

 Related companies

Make a complaint about Next by viewing their customer service contacts.