Next has warned it may have to close stores after losing a significant legal battle over equal pay, which could cost the retailer more than £30 million.
The clothing and home goods chain FTSE 100 announced in its half-year report that the ruling could have consequences for the profitability of individual stores. Last month, an employment tribunal ruled in favor of 3,540 current and former female store workers, who claimed they were paid less than the predominantly male workers in the company’s warehouses.
Next is appealing the decision, which dates back to October 2018, and stated that the legal team is “very confident” in their appeal grounds. However, the retailer acknowledged that resolution of the case could take more than a year.
The landmark decision is the first of its kind against a British retailer and opens the door to further claims. A similar equal pay case involving more than 60,000 Asda workers 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. Higher operating costs will lead to more store closures as leases expire and will hinder new store openings.”
Next also raised concerns about its warehouse operations, noting that wage increases in warehouses would necessitate an equal increase in store staff salaries, further impacting the company’s cost structure.
Despite the warnings, Next CEO Lord Wolfson clarified that the retailer is not making threats but is simply addressing the financial realities of its stores’ profitability. “Whether we open or close stores will depend on the profitability of each individual store,” Wolfson explains. He also pointed out that many high street stores have closed in the past decade due to rising costs and falling sales.
Next, which operates 458 stores in the UK, does not employ any workers on zero-hour contracts and instead offers extra hours to existing staff during peak periods such as Christmas.