Next has warned that it may have to close stores after losing a significant legal battle over equal pay, which could cost the retailer over £30 million.
The FTSE 100 clothing and homewares chain announced in its half-year report that the ruling could affect the profitability of individual stores. Last month, an employment tribunal ruled in favour of 3,540 current and former female store staff who argued they were paid less than predominantly male employees in the company’s warehouses.
Next is appealing the decision, which dates back to October 2018, and stated its legal team is “very confident” in their grounds for appeal. However, the retailer acknowledged that the case could take more than a year to resolve.
The landmark decision is the first of its kind against a British retailer, opening the door for further claims. A similar equal pay case involving over 60,000 Asda employees is expected to conclude early next year.
In its report, Next highlighted the potential consequences of the ruling, warning: “Some of our stores will no longer be viable if this ruling is upheld on appeal. Increased operating costs will lead to more store closures when leases expire and will hinder new store openings.”
Next also raised concerns about its warehouse operations, noting that wage increases in warehouses would necessitate matching increases in store staff salaries, further impacting the company’s cost structure.
Despite the warnings, Lord Wolfson, Next’s chief executive, clarified that the retailer is not issuing threats but simply addressing the financial realities of store profitability. “Whether we open or close stores will depend on each individual store’s profitability,” Wolfson explained. He also pointed out that many high street shops have closed in the past decade due to rising costs and declining sales.
Next, which operates 458 stores across the UK, does not employ workers on zero-hours contracts and instead offers additional hours to existing staff during peak periods such as Christmas.
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Next warns of potential store closures following £30m equal pay ruling