ECB chic

23 Mar 2017 By Carol Ryan

The retailer has subjected itself to a stress test – previously the stuff of banks. The result: if a store’s sales fall 6 pct a year for a decade, its net profit margin will halve. Openness about problems is welcome. But this voluntary exam may gloss over some other risks.

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British fashion store Next included a long-term stress test of its retail portfolio in the group’s full-year results on March 23.

The clothing chain projected net store profitability by 2026 based on three different scenarios of declining like-for-like retail sales as shoppers increasingly buy online.

The worst-case scenario, a 6 percent annual decrease in like-for-like sales, would halve net store profitability from the current 20 percent to 10 percent.

The company said full-year retail sales fell 2.9 percent in the 52 weeks to January and retail profit declined 15.8 percent. Sales through Next Directory grew by 4.2 percent in the year.

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