Next proves one of the great survivors with lockdown sales

“I’m a survivor, I’m not gon’ give up . . . I’m a survivor . . . keep on survivin’ ”, sang Beyoncé’s old band Destiny’s Child. Softly spoken and cerebral Next boss Simon Wolfson might be the antithesis of the early-noughties girl group. But their anthem fits the retailer rather neatly.

Next has long since proved its retail survival creds, pivoting online far more successfully than ageing rival M&S. Wednesday’s trading update was the latest incarnation of its resilience.

Next can’t quite be said to be thriving, when profits for the year to January 2021 are expected to be little more than a quarter of last year’s. Still, it has emerged from lockdown in reassuring shape.

By selling assets and suspending dividends and buybacks, Next has shored up cash and reckons net debt will come down 40 per cent by the end of the year, to £650m.

Sales have also held up better than Next surmised in April. A second-quarter slump of 28 per cent was more than 20 percentage points ahead of its most optimistic guesstimate for the period three months ago.

Next is not alone in proving unnecessarily despondent. Primark too has bounced back well. But even though full price sales over the past six weeks have recovered to within 8 per cent of last year’s levels, Next is sticking with the surviving not thriving theme. It reckons sales for the second half of the year will be almost 20 per cent lower than last year.

It is too soon to write the company off as constitutionally pessimistic. Next has been caught out by quirks of timing in its forecasting through the pandemic, publishing early estimates in March when the full extent of the chaos to come was unclear, then updating them in April as it was reeling from a warehouse shutdown.

Lord Wolfson frets about a second lockdown and rising unemployment when furlough support ends. Some factors that helped in the second quarter, like pent-up demand for in-store sales and lower returns rates, won’t be repeated. A full-year sales decline of more than a quarter seems overly glum, nonetheless.

Lord Wolfson has spent around only a quarter of his time managing disruption from the pandemic, the rest plotting future strategy. Expect Next to do more than merely survive.

BDO finally falls foul of FRC

It had to happen some time. BDO finally has a black mark against its name under the UK audit watchdog’s enforcement procedures. The firm had remained squeaky clean as rivals both big and small racked up fines. With a fine and a rap on the knuckles for partner David Roberts, it has descended to the ranks of the rest.

Technically. BDO’s £200,000 fine, discounted 20 per cent for playing nicely, is hardly up there with the worst of them. The Big Four last year set aside £162m to cover legal claims and fines. In the 2019 financial year, the Financial Reporting Council stuck firms with more than £40m in penalties. And whether from a sense of wounded pride — termed “toothless” in 2018 by MPs — or otherwise, it has been getting more severe with its sanctions.

Grant Thornton received a £3m fine this month for its ethical and objectivity failings in its audits of drinks retailer Conviviality. Last year the FRC hit KPMG three times over: £5m for work on bank BNY Mellon’s audits; £5m for insufficient professional scepticism on the 2009 Co-op Bank audit; and £6m over work on motor insurer Equity Red Star. To top that off, both firms are under scrutiny for work on high profile corporate collapses, GT on Patisserie Valerie and KPMG on Carillion. Deloitte, meanwhile, faces a £15m fine for “serious and serial failures” in its audits of Autonomy.

BDO’s piddling penalty speaks to the seriousness of its transgression. In auditing an insurer, it relied on the opinion of independent expert actuaries to assess the company’s approach to claims when it should have done more to check the work itself. There was no intentional naughtiness, no dishonesty or recklessness, the regulator says.

Losing its sanction-free record is nonetheless a moment for BDO. Given their own shortcomings, it’s not a moment rivals should revel in.

Never say never again

Aston Martin never ceases to come up with ways to surprise investors. First there was the share price slump, which took the Bond carmaker from a £19-a-share float price to a 30p-a-share rights issue in barely 18 months. Then there was the £150m placing launched in June, less than three months after the previous cash call completed. Aston’s latest: the revelation that last year’s operating losses were £15m worse than previously thought because of an accounting error. No one buys an Aston Martin for a quiet life. Shareholders could be forgiven for wanting an easy ride for a while, though.


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