Next warns of potential store closures following £30m equal pay ruling

Next has warned it may have to close its stores after losing a major legal battle over equal pay, which could cost the company more than £30m.

The FTSE 100 clothing and homeware chain said in its half-yearly report that the ruling could impact the profitability of individual stores. Last month, an employment tribunal ruled in favour of 3,540 current and former female store employees who claimed they were paid less than male staff in the company’s warehouses.

Next is appealing the October 2018 ruling, and said its legal team is “very confident” in its 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 to more claims. A similar gender pay case involving more than 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 not be viable if this ruling is upheld on appeal. Increased operating costs will lead to more store closures as leases expire and will hinder new store openings.”

Next also expressed concerns about its warehouse operations, noting that warehouse wage increases would entail similar increases in store employee salaries, further impacting the company’s cost structure.

Despite the warnings, Lord Wolfson, Next’s chief executive, made it clear that the company was not making threats, but simply addressing the financial realities of store profitability. “Whether stores open or close depends on the profitability of each individual store,” Wolfson said. He noted that many department stores have closed in the past decade due to rising costs and falling sales.

Next, which operates 458 stores across the UK, does not employ workers on fixed-term contracts, instead offering overtime to existing staff during peak periods such as Christmas.