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You can find the current article at its original source at https://www.theguardian.com/business/live/2018/sep/25/next-warns-of-port-delays-as-biggest-brexit-risk-business-live
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| Next warns of port delays as biggest Brexit risk – business live | Next warns of port delays as biggest Brexit risk – business live |
| (35 minutes later) | |
| Laith Khalaf, senior analyst at Hargreaves Lansdown, said: | |
| Next has decided it can do without the headache of currency risk stemming from Brexit, and has hedged out its exposure to sterling on products it plans to sell right up to January 2020. This means it won’t benefit from any rise in sterling, but equally there are no nasty surprises for the business if the currency heads in the other direction. | |
| Next deserves credit for presenting investors with a clear and insightful picture of its business in this set of results. The retailer has shown itself to be a resilient, well-managed company through a difficult period for the sector. Next isn’t immune to the problems besetting the high street, but it’s doing the right things to ensure it makes it to the other side in decent shape. | |
| Here is some reaction to the Next figures. Sofie Willmott, senior retail analyst at data company GlobalData, said: | |
| The positive figures announced by high street bellwether Next are likely to be perceived as a sign that the UK retail environment is recovering, however Next has made wise operational decisions which have aided growth and enabled the retailer to capitalise on changing shopping habits. Next’s robust performance should not be attributed to a general upturn in consumer spending and as such other retailers that are not making strides in improving their customer proposition, are unlikely to see the same results. | |
| Next is better protected as sales continue to transition online, given the dominance of its digital channels, and is well prepared with a more agile retail estate comprising of shorter leases and profitable stores. | |
| Stores remain a declining part of the business but Next is utilising physical locations to its advantage, for example by adding in concessions to drive revenue and give shoppers other reasons to visit Next, and also as a back-up stock pool for online orders. In addition Next is considering using stores as collection points for ‘third-party non-competing businesses’ demonstrating a willingness to extend its purpose, in order to provide convenience for shoppers and adapt to changing consumer needs. | |
| Meanwhile, Unilever executives have taken to the airwaves and the press to defend their plans to scrap the company’s dual British-Dutch structure, picking Rotterdam over London as its single headquarters. | |
| The creation of a single holding company based in the Netherlands means that the company will drop out of the FTSE 100 index, forcing UK tracker funds and those with strict UK investment mandates to sell their holdings. | |
| The plans have angered some UK investors. A major Unilever shareholder, Aviva Investors, plans to vote against the plans. David Cumming, the chief investment officer, has urged other Unilever shareholders to follow suit. | |
| In a charm offensive, Unilever’s chairman, Marijn Dekkers, wrote an op-ed in the Daily Telegraph while the chief financial officer, Graeme Pitkethly, made an appearance on BBC radio 4’s Today programme. | |
| Both stressed that the company, which makes a huge range of well-known consumer products such as Dove soap, Persil and Marmite, remained committed to Britain. | |
| Dekkers wrote: | |
| Rest assured that reports of Unilever leaving the UK could not be further from the truth. Two of our three operating divisions at Unilever, which represent 60% of our turnover, will remain headquartered from our offices in London. | |
| We also employ around 7,000 people across the country, which will not change as a result of the board’s proposals. | |
| In fact, simplifying our business is all about allowing our operating divisions to compete and perform even better for the future. And if they perform better that is good news for the UK and it is good news for our shareholders. | |
| Cumming told BBC radio that it looked like Unilever was moving to the Netherlands for better takeover protection, following last year’s failed $143bn takeover approach from Kraft Heinz. | |
| Pitkethly responded by saying “the best form of protectionism is great performance”. | |
| Unilever’s plans will be put to shareholder votes in late October. | |
| The third UK retailer to report figures this morning, Hotel Chocolat has posted a 13% rise in full-year profits. The upmarket chocolatier is pressing ahead with store openings abroad, pushing into Scandinavia, Japan and the US. | The third UK retailer to report figures this morning, Hotel Chocolat has posted a 13% rise in full-year profits. The upmarket chocolatier is pressing ahead with store openings abroad, pushing into Scandinavia, Japan and the US. |
| The firm reported a profit before tax of £12.7m for the year to 1 July. The upbeat figures sent its shares up nearly 3% to 348.5p. | The firm reported a profit before tax of £12.7m for the year to 1 July. The upbeat figures sent its shares up nearly 3% to 348.5p. |
| Elsewhere on the high street, Card Factory has not fared as well. It has blamed weak consumer spending for an 8.9% drop in underlying profits in the six months to 31 July to £29.9m. Like-for-like sales – at stores that have been open at least a year – slipped 0.2%. | Elsewhere on the high street, Card Factory has not fared as well. It has blamed weak consumer spending for an 8.9% drop in underlying profits in the six months to 31 July to £29.9m. Like-for-like sales – at stores that have been open at least a year – slipped 0.2%. |
| Shares in the FTSE 250 company fell more than 7% in early trading, and are now down 5.3% at 176.3p. | Shares in the FTSE 250 company fell more than 7% in early trading, and are now down 5.3% at 176.3p. |
| The group said it had been selling fewer everyday ranges such as birthday cards, but its Valentine’s Day, Mother’s Day and Father’s Day ranges each produced record sales. | The group said it had been selling fewer everyday ranges such as birthday cards, but its Valentine’s Day, Mother’s Day and Father’s Day ranges each produced record sales. |
| The greeting card retailer still expects to make full-year profits of £89m to £91m, after lowering its forecast in August. | The greeting card retailer still expects to make full-year profits of £89m to £91m, after lowering its forecast in August. |
| The chief executive, Karen Hubbard, said: | The chief executive, Karen Hubbard, said: |
| Our like-for-like performance has impacted profitability, as have the ongoing cost headwinds of foreign exchange and national living wage. | Our like-for-like performance has impacted profitability, as have the ongoing cost headwinds of foreign exchange and national living wage. |
| Never mind the Brexit contingency plans. Traders clearly like the profit upgrade from Next – its shares jumped just over 9% when the market opened, and are still up 8.6% at £55.52. Marks & Spencer and Primark owner Associated British Foods have also benefited and are among the main risers on the FTSE 100. | Never mind the Brexit contingency plans. Traders clearly like the profit upgrade from Next – its shares jumped just over 9% when the market opened, and are still up 8.6% at £55.52. Marks & Spencer and Primark owner Associated British Foods have also benefited and are among the main risers on the FTSE 100. |
| The FTSE 100 as a whole has inched up nearly 5 points to 7463.32. | The FTSE 100 as a whole has inched up nearly 5 points to 7463.32. |
| The German Dax and and French CAC are slightly down, while Italy’s FTSE MiB is 0.5% ahead and Spain’s Ibex has risen 0.3%. | The German Dax and and French CAC are slightly down, while Italy’s FTSE MiB is 0.5% ahead and Spain’s Ibex has risen 0.3%. |
| In a detailed section on duties, Next warns that stock imported into the UK could end up incurring double duty if its then exported to any country outside the UK. There is an additional risk when goods are sold online and dispatched from the UK to the EU, it said. | In a detailed section on duties, Next warns that stock imported into the UK could end up incurring double duty if its then exported to any country outside the UK. There is an additional risk when goods are sold online and dispatched from the UK to the EU, it said. |
| Customers will become liable for duty on the selling price of the goods rather than their cost price. This is because the customer would, in effect, be importing the goods at selling price into the EU from outside. | Customers will become liable for duty on the selling price of the goods rather than their cost price. This is because the customer would, in effect, be importing the goods at selling price into the EU from outside. |
| So Next has set up a German company to send goods to EU customers. It explains: | So Next has set up a German company to send goods to EU customers. It explains: |
| It is likely goods would be sold to our German company from our UK company. Goods would then be deemed to have been imported into the EU by our German company at cost plus a reasonable transfer premium, in the same way as if they had been imported direct from the overseas territory in which they were manufactured. | It is likely goods would be sold to our German company from our UK company. Goods would then be deemed to have been imported into the EU by our German company at cost plus a reasonable transfer premium, in the same way as if they had been imported direct from the overseas territory in which they were manufactured. |
| It is our intention to bond our German warehouse facility so that goods will only incur duty when they leave it and go into free circulation in the EU. This will enable unsold goods that return from Germany to the UK to avoid double duty... | It is our intention to bond our German warehouse facility so that goods will only incur duty when they leave it and go into free circulation in the EU. This will enable unsold goods that return from Germany to the UK to avoid double duty... |
| it is our intention to steadily increase the volume of our EU business served through our German warehouse. | it is our intention to steadily increase the volume of our EU business served through our German warehouse. |
| The company has also set up a company in Ireland, which will own goods sent from the UK to its Irish stores. This means that goods can be imported into Ireland at a cost (plus a reasonable transfer premium) and will incur very little additional duty. | The company has also set up a company in Ireland, which will own goods sent from the UK to its Irish stores. This means that goods can be imported into Ireland at a cost (plus a reasonable transfer premium) and will incur very little additional duty. |
| The Next chief executive, Wolfson, has said in the past that leaving the EU could spark an “economic renaissance” for Britain, by enabling trade deals to be struck in emerging markets and allowing the UK to leave behind swaths of regulation. | The Next chief executive, Wolfson, has said in the past that leaving the EU could spark an “economic renaissance” for Britain, by enabling trade deals to be struck in emerging markets and allowing the UK to leave behind swaths of regulation. |
| However, he has urged the government not to rush negotiations, warning that the economy would suffer from a botched or rushed deal. | However, he has urged the government not to rush negotiations, warning that the economy would suffer from a botched or rushed deal. |
| Next, seen as a bellwether of the high street, reported a 0.5% rise in first-half profits to £311m in the 26 weeks to 28 July after full-price sales rose 4.5%. However, it warned: | Next, seen as a bellwether of the high street, reported a 0.5% rise in first-half profits to £311m in the 26 weeks to 28 July after full-price sales rose 4.5%. However, it warned: |
| The UK retail market remains volatile, subject to powerful structural and cyclical changes. Many of these headwinds have not abated. As expected, sales in our stores (which now account for just under half of our turnover) continue to be challenging. | The UK retail market remains volatile, subject to powerful structural and cyclical changes. Many of these headwinds have not abated. As expected, sales in our stores (which now account for just under half of our turnover) continue to be challenging. |
| We believe the over-performance in the first half was flattered by the unusually warm summer and we remain cautious in our outlook for the rest of the year. | We believe the over-performance in the first half was flattered by the unusually warm summer and we remain cautious in our outlook for the rest of the year. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| The high street retailer Next has set out its contingency plans for a no-deal Brexit. It highlighted queues and delays at ports as the biggest risk to its business if the UK were to leave the EU without a customs arrangement in place. It also warned of higher tariffs and a further weakening of the pound, which the company is hedging against. | The high street retailer Next has set out its contingency plans for a no-deal Brexit. It highlighted queues and delays at ports as the biggest risk to its business if the UK were to leave the EU without a customs arrangement in place. It also warned of higher tariffs and a further weakening of the pound, which the company is hedging against. |
| However, the company added that it does not see a “material threat” from Brexit. Next, which is run by Lord Wolfson, who has backed Brexit, said: | However, the company added that it does not see a “material threat” from Brexit. Next, which is run by Lord Wolfson, who has backed Brexit, said: |
| It is not yet clear how well prepared HMRC systems, customs and other relevant personnel will be for the upcoming potential increase in workload and data capture. | It is not yet clear how well prepared HMRC systems, customs and other relevant personnel will be for the upcoming potential increase in workload and data capture. |
| We believe that the biggest risk to our business is the external risk of UK ports not coping with the additional volume of customs work they would be required to undertake if no changes are made to the UK’s current procedures... We believe that it remains open to the government to initiate changes in the way customs procedures operate and that such measures could eliminate much of the risk to our ports. | We believe that the biggest risk to our business is the external risk of UK ports not coping with the additional volume of customs work they would be required to undertake if no changes are made to the UK’s current procedures... We believe that it remains open to the government to initiate changes in the way customs procedures operate and that such measures could eliminate much of the risk to our ports. |
| The retailer added: | The retailer added: |
| There are significant challenges involved in preparing for a no-deal outcome and we would not want to understate the work we are doing to prepare for this eventuality. However, we do not believe that the direct risks of a no-deal Brexit pose a material threat to the ongoing operations and profitability of Next’s business here in the UK or to our £190m turnover business in the EU. | There are significant challenges involved in preparing for a no-deal outcome and we would not want to understate the work we are doing to prepare for this eventuality. However, we do not believe that the direct risks of a no-deal Brexit pose a material threat to the ongoing operations and profitability of Next’s business here in the UK or to our £190m turnover business in the EU. |
| We are well advanced in our preparations and are setting up all the administrative, legal and physical infrastructure that will be needed to operate effectively if the UK and EU are unable to agree a free trade agreement. We are confident all the necessary arrangements we need to make will be in place by March of next year. | We are well advanced in our preparations and are setting up all the administrative, legal and physical infrastructure that will be needed to operate effectively if the UK and EU are unable to agree a free trade agreement. We are confident all the necessary arrangements we need to make will be in place by March of next year. |
| The comments came as Next upgraded its profit forecast after sales were boosted by the long heatwave, but warned that the market remained tough. Its raised its full-year forecast for profit before tax by £10m to £727m, similar to last year’s profit of £726.1m. | The comments came as Next upgraded its profit forecast after sales were boosted by the long heatwave, but warned that the market remained tough. Its raised its full-year forecast for profit before tax by £10m to £727m, similar to last year’s profit of £726.1m. |
| The agenda | The agenda |
| 9.40am BST Bank of England policymaker Gertjan Vlieghe speaks at Imperial College in London | 9.40am BST Bank of England policymaker Gertjan Vlieghe speaks at Imperial College in London |
| 9.10am/11.45am ECB chief economist Peter Praet speaks in London | 9.10am/11.45am ECB chief economist Peter Praet speaks in London |