Next wants CVA clause in future rental agreements

By

Barbara Santamaria

Published
May 21, 2018

Next has plans to capitalise on the recent flurry of rivals receiving rent cuts by adding a special clause to its rental policy.

The British fashion chain wants to ask landlords to agree to rent reductions on its stores if a neighbouring shop has received a similar deal through a company voluntary agreement, according to The Sunday Times.

The high street has seen several British retailers resort to the insolvency process in a bid to avoid collapse. A CVA allows retailers to negotiate rent reductions with landlords, a measure that would be otherwise extremely difficult to achieve.

Mothercare, New Look, Select and Carpetright have all recently been forced to seek help, while House of Fraser is expected to enter a CVA in June.

Despite the current pressures facing the UK retail sector, Next has been performing relatively well, particularly online. The brand’s latest trading statement revealed a 6% increase in full-price sales for the first quarter to 7 May, with the strong online channel (+18%) offsetting a 4.8% decline in retail store sales.

Next said first quarter sales were better than expected and around £40m ahead of forecasts. This will add around £12m to full-year profit, and as a result, EPS is expected to increase by 3.7%, compared to the 1.4% previously expected.

Additionally, Next said its cash flow remains strong and that it will generate around £300m of surplus cash after deducting interest, tax, capital expenditure and ordinary dividends.