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* First quarter stores sales fall 52%, online down 32%
* Stores shut since British lockdown began on March 23
* Dividends and share buybacks suspended
* Banking covenants waived
* Shares down 2%
(Adds detail, CEO, analyst comment, updates shares)
By James Davey
LONDON, April 29 (Reuters) - Next said it had sold
property, suspended share buybacks and dividends and delivered
higher cost savings to shore up its finances and get the British
clothing retailer, whose quarterly sales plunged 41%, through
the coronavirus crisis.
The group said on Wednesday the decline in sales had been
faster and steeper than anticipated in a March stress test, with
store sales slumping 52% in the 13 weeks to April 25, its fiscal
first quarter, while online sales dropped 32%.
Next closed all its stores on March 23, when Britain began a
coronavirus lockdown, while online operations, which account for
more than half of group sales, shut three days later before
partially re-opening on April 14.
Online capacity is running at about 45% of pre-crisis
levels, with 70% of ranges available, and Next said it hopes to
increase capacity to around 70% within the next two weeks.
Next, whose shares were down 2% at 1049 GMT, also said it
had agreed covenant waivers with its banks and secured further
borrowing capacity through the British government's Covid
Corporate Financing Facility (CCFF).
"While this year’s scenarios remain fluid, we can only gain
confidence from management’s actions and control over the
business," analysts at Peel Hunt said.
The Confederation of British Industry said on Tuesday that
retailers endured their biggest sales fall since the 2008
financial crisis in the first half of April. But those with an
effective online operation, such as Dixons Carphone, are faring
better.
Next said its finances were at least as secure as when it
updated in March. It has saved around 290 million pounds ($361
million) on stock purchases, while suspending dividends and
share buybacks will save it 480 million pounds.
The sale and leaseback of warehouses and its head office in
Enderby, central England, will generate another 155 million
pounds, the group added.
WORST CASE SCENARIO
Even in its new worst case scenario, with full year 2020-21
full-price sales down 40%, Next said it can operate comfortably
within its cash resources and would end the year with less net
debt than at the end of the previous year.
In that scenario it would, however, make a pretax loss of
150 million pounds ($186 million), compared with a profit of 729
million pounds in 2019-20.
Britain is set to review lockdown restrictions on May 7 and
Next said much will depend on its ability to increase online
capacity within the constraints of new safe working practices
and on the timing of store re-openings.
"One of the reasons we're ramping up (online) slowly is to
make sure that at every stage we don't go past the point at
which we can cope," Chief Executive Simon Wolfson told Reuters.
Next, which plans to re-open stores with social distancing
and safety measures such as perspex screens at tills and
sanitisation stations, will prioritise opening larger
out-of-town stores.
"I'm expecting in the next two or three weeks that we'll be
ready to open a meaningful number of stores," said Wolfson
adding he expects sales to be subdued.
(Reporting by James Davey; Editing by Kate Holton, Barbara
Lewis and Alexander Smith)
