Next to renegotiate 74 store leases this year

Next has outlined plans to renegotiate 74 store leases this year, after saving £6.7m in costs from lease renewals in its latest financial year. The retailer, seen as a bellwether for the industry, shrunk its costs after renewing 56 leases in the year to January. In addition to those reductions, it made £3.8m from capital contributions and rent-free periods. Next said it will spend that amount on upgrading and maintaining its stores. It estimates it will save another £3m from its renegotiations this year, lowering its costs by another 16%. The average lease term of its portfolio, to the earlier of the break clause or lease end, is expected to be 3.9 years. Next said the expected 16% decrease is lower than what it has achieved in recent years. That is because some of the leases coming up for renewal this year have already been renegotiated since 2018; those stores are already on post-pandemic levels of rent and so reductions are likely to be small. At the end of January 2024, its average lease commitment was 4.5 years, compared with 4.7 years at the same time last year. Half of its store leases by value will expire or break within 3.9 years and 95% within the next 10 years. The retailer’s store portfolio totalled just over 8.1m sq ft across 458 shops in January this year, inching down from 8.2m sq ft across 466 at the same point in 2023. Next said that while it will continue to open and close a small number of stores, it does not expect any material net change in its retail selling space in the year ahead. The news comes as the retailer’s group profit before tax grew by 5% to hit a record high of £918m during the year, on a 4% rise in full-price sales. The FatFace brand, which it bought for £115m last year, generated £1.7m profit from the sale of land in Rotherham. Prior year profit of £14.2m came from two warehouse sale and leaseback transactions, one of which related to a transaction completed in 2020-21 and the other to Next’s Elmsall 3 warehouse, which completed last year. Image © Dinendra Haria/Shutterstock