Next revealed it has spent an extra £2m on warehouse space to hold additional stock as it suspended operations due to the coronavirus lockdown.
The retailer told investors sales had suffered, dropping by 52% between 26 January to 25 April 2020. In the three days before 23 March when its stores closed, retail sales had plummeted by 86%.
Last month, Next also temporarily closed its UK warehouses and distribution networks in order to “adapt its operations to working safely in a coronavirus world”.
“The reduction in sales volumes has meant that we have a lot more stock in our warehouses than anticipated. This excess stock would have prevented the intake of new stock and inhibited ongoing operations,” it said.
“This problem has been addressed through the addition of third-party storage facilities in the UK and, in some cases, by holding stock in source countries. We estimate that the additional cost of these facilities in the current year will be in the region of £2m.”
Next resumed its online operations on 14 April with measures to protect employees including social distancing and increased sanitisation.
The retailer saved £290m by cancelling stock it longer needed and identifying stock that could be carried over to future seasons.
It explained: “We have endeavoured to be fair to our suppliers. In a letter to our suppliers in late March 2020, Next committed to honour and pay them in full, on normal payment terms, for orders that were due to leave supplier factories up to and including 10 April 2020.
“Orders due to leave supplier factories after this date that are no longer required, have been cancelled and compensation payments made towards the raw materials that suppliers have acquired. We are still selecting ranges and continue to order stock for later in the year.”
Next added it had continued to select ranges and order stock for the rest of the year. “There is no point in not buying coats because we have too many t-shirts,” it added.