This clothing retailer in the UK is currently in an interesting position. They closed their stores before the lockdown came into effect, and they also stopped their online ordering to make sure their workers were safe and protected.
This is a sharp contrast to many online retailers who have seen an increase in demand and even hired more staff. Next has taken, what many would consider, the moral approach during the pandemic. However, morals don’t pay the bills and the share price was crushed.
They have tried to reopen the online store offering “essential” items rather than their full range. To make sure their staff are protected and to run with less people, reducing the risk of exposure.
Within hours the site had to be taken down due to demand.
Explaining Tuesday’s surge, a spokesman said the firm had only asked people who wished to return to work to come in.
About 3,000 people have volunteered, but all will need to go through a safety training course meaning most will not be back at work for several weeks.
Looking at this from an investment perspective, have they increased their customer loyalty and brand trust, or can that not be achieved for retailer such as Next? Or is taking the moral approach simply the right and expected thing to do.
The question many investors will be asking themselves, is this the discount sale they have been waiting for to pickup Next? Let’s look at some facts.
Unsurprisingly this is not the picture of a premium ball gown, but rather a comfortable but rather plain t-shirt.
While Next is an incredibly profitable business, thanks in part to the fast fashion trend, the financial strength of the company is extremely poor. As the debt loads up and the money isn’t coming in, this could be a thread that quickly unravels.
It shouldn’t be a shock that the value is very poor. The mix of high profitability but debt heavy doesn’t make for a comfortable balance during a pandemic.
Even after losing so much value on their share price, the company is still considered very expensive. Which depending on your fashion tastes, you may have already felt about Next.
Finally we talk about the future prospects. While closing your stores and your online store is without a doubt the correct moral decision, will this be recovered in future profits? The analysts don’t think so.
If there is growth to be had, it is not going to be this stock any time soon. There is no next day delivery available on their revenue growth forecasts.
We will see how Next copes as they slowly reopen their online store and manage their warehouse. Next is a British high street cornerstone, which makes it part of an endangered species.
What do you think? Is Next wearing a shirt that is too big and needs to be trimmed down to size? Or maybe a bit of tailoring to their business model will result in a sharper future outlook?
No matter what the investment future holds, it’s always a pleasure to see people over profit. I hope they are rewarded for that belief.