As the golden quarter gets underway, Next has revised its potential sales scenarios in the coming weeks based on expected consumer behaviour and possible new government rules that could further impact how people live and shop.

Crystal ball-gazing, hard at the best of times, is even more difficult at present, and Next chief executive Lord Wolfson points out that it is impossible to be exact in such an uncertain climate.

“The more precisely we try to predict it, the less likely we are to be right,” he tells Retail Week.

Next is often seen as a benchmark against which the retail industry measures itself but, with so many moving parts and unknowns, that may not be the case this year. Having outperformed many competitors – it raised its central profit guidance today – Next could be better placed than others to navigate the scenarios it set out (see table, below).

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Retail Economics chief executive Richard Lim believes Next’s scenarios are focused on the retailer’s particular situation and proposition, so may not be representative of what could happen across the industry. 

“What we’ve seen since lockdown and the bounceback in retail sales, and what we’d expect to see over the coming months, is an uneven picture across the industry,” Lim says.

“Over the last three months we’ve seen quite buoyant retail sales but a lot of that has been driven by categories that are associated with the housing market and homes in general as a consequence of the shift in lifestyle that we’re going through.

“The flipside of that is that apparel has been one of the sectors that has been hardest hit because of the lack of social interaction [and] working from home, which has undermined the demand for new clothing.”

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Next recently launched its Beauty & Home store format

Next is in the strong position of offering homewares as well as clothing, which has helped its overall performance. 

Next’s strong online position may also set it apart from some other retailers should customers begin to avoid busy stores, or if ‘non-essential’ shops are closed altogether by the government as it attempts to battle the pandemic.

In Next’s worst-case scenarios, if this happened, full-price sales could plummet to -20% year on year.

GlobalData lead analyst Emily Stella believes that is a realistic downside view because the fashion sector has been the hardest hit throughout the pandemic. However, she also thinks Next’s central scenario looks realistic.

“We’re essentially expecting a stay-at-home Christmas where we’re going to be restricted on the numbers of people we can meet, and no mixing of households could mean we might not even be with wider families,” she says.

“We’re assuming that Christmas is going to be scaled back and, as a result, there’s going to be less gifting and more investment in the home itself.

“It really depends on which sector retailers fall under. We expect home retailers will do really well this quarter, as consumers will want to enjoy their homes during the winter months. For clothing and footwear, though, there’s going to be no going out or parties so demand will fall off of the cliff. 

“Where Next really profits, and other fashion retailers don’t, is that it has quite a broad product range and can switch where it focuses its products.”

Both Lim and Stella agree that Next is better placed than other fashion retailers to “weather the storm” because it can fall back on its other categories. That means its scenarios may be more positive than could be expected of fashion specialists. 

Moreover, the central scenario expects that more local lockdowns in different tiers could be on the cards, but Lord Wolfson told Retail Week the differences in customer behaviour and footfall across each of the tiers is “very marginal”.

This has not been the case for other fashion retailers, however, with value footwear retailer Shoe Zone reporting that its stores in Tier 2 and 3 areas have been “greatly impacted” by the increased uncertainty and new regulations.

Whichever scenario plays out over the next two months, the likelihood is that Next will navigate it more successfully than the wider apparel sector.