Next has posted an increase in full-year profits but warned that the coronavirus pandemic will spark a “significant downturn in sales”.

The fashion giant, which registered a 0.8% uptick in pre-tax profit to £728.5m in the year to January, has modelled a number of coronavirus scenarios – including one that would see full-price sales plummet £1bn in its current financial year.

Next boss Lord Wolfson admitted there was “no way of predicting the extent that the effect coronavirus will have” on the business.

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Lord Wolfson: ‘Our sector continues to experience profound and lasting structural changes and these changes are not on hold’

But the retailer has conducted a coronavirus stress test, based on three scenarios that would see sales drop £445m, £820m and £1bn respectively – amounts that equate to 10%, 20% and 25% of annual turnover. Next total sales increased 3.3% to £4.4bn in the 12 months to January.

Next concluded that it “could comfortably sustain the loss of more than £1bn” in full-price sales during the year without exceeding its bond and bank facilities.

The retailer admitted that such a slump in demand, which would hit both stores and online, is “by far the greatest challenge we face”.

It said stores would be impacted more severely than online, but admitted its ecommerce operation would “also suffer significant losses” during the pandemic.

In order to mitigate the anticipated slump in sales, Next said it had mapped out a number of cost-control measures, including the suspension of its share buyback programme, the delay of discretionary capital expenditure, the sale and leaseback of one of its warehouses and the deferral of its August dividend.

However, it stressed that it was “unlikely” that it would need to pull all of those levers.

Wolfson said: “There will be many challenges to our working practices as the pandemic develops and we are putting plans in place to protect our most vulnerable employees, comply with differing levels of government restrictions and cope with illness throughout the business.

“In particular, we are adapting our technology for greater home working and seeking to segregate critical operational teams so as to keep all our vital operations and projects on track.

“Sourcing and developing new and exciting product ranges for the back end of the year remains vitally important. This will be a particular challenge because it normally involves a great deal of international travel.

“Our product teams travel to factories to develop new items and to overseas retail markets for inspiration. Such travel is likely to be impossible as the pandemic progresses. We are putting in place measures to compensate for a lack of face to face contact – video conferencing, online inspiration ‘trips’ and more.”

Wolfson said that, amid the coronavirus crisis, “our sector continues to experience profound and lasting structural changes and these changes are not on hold”.

He said it is the plans Next already has in place to continue “moving the business forward that will make the difference to the long term future of the company”.

Analysis: Next and ‘business as usual’ in the time of the coronavirus