Next grows profits as rents high streets decline

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High Street Retail:

Next boss Lord
Wolfson says that Next was cushioned by his online ‘head start’,
while he feels “concerned� for the future of the high street when
competitors are struggling to survive. Next was fortunate to have the
head start it had with its online sales, which have boosted its sales
and high street rents are now being cut.

As reported by
Isabella Fish of Drapers online, Next’s profit before tax
grew by 2.7% to £319.6m in its half-year results to 31 July,
full-price sales were up 4.3% and total sales, including markdown,
were up 3.8% on last year. While in-store sales fell by 5.5% to
£874.3m on the same period in 2018, and online sales grew by 12.6%
to £1bn.

Lord Wolfson cited
the “head start� Next had with its online business as a major
factor in its success compared to other retailers, moving from a
catalogue model to online:

“We were
incredibly fortunate that we started this millennium with a mail
order business because a mail order business has, in essence, all the
assets of online – other than a website – that you need for
online trading.

“We had the
delivery network, we had the systems, we had the warehouses and the
customer-base. Because we had that base from 1995 onwards, that has
been enormously helpful to us over the last 20 years,� said
Wolfson.

According to
Drapers, Next’s website was launched in 1999 and cost £7,000
to build and launch. Its Label business, selling third-party brands,
increased 26% on full-price sales with total sales, including
markdown, up 29% in the first 6 months of 2019, compared with 2018.

At the end of the
first half of 2019 Next had 499 stores, and Wolfson admitted to
Drapers that he is worried by the number of high street store
closures:

“Of course it’s
a concern, but it’s a concern we’ve tackled head-on. It’s not
going to be painless and we’re not through the woods yet, but with
the extent and speed that rents are being cut and the relatively
short-term that leases are being offered, we can see a way of
managing that decline in such a way that the group continues to
prosper.�

For the year ending
January 2020, Next says it expects to renegotiate 37 leases,
achieving rent reductions of 28% and renewing for an average lease
term of 4.2 years.

“The conversations
we’re having with landlords are matter-of-fact, not
confrontational. At the end of the day, there’s a price at which we
can afford to keep shops open and a price at which we can’t, and we
give that option to the landlords,� says Wolfson.

“I feel badly for
landlords in a way because the rents being so high is not the fault
of retail landlords, we have built rents up to where they are and
we’re now paying the price of that. As and when leases are coming
up for renewal, we’re offering the landlord what we can pay to keep
the shop open for the duration of the term they’re offering us.

“Firstly, average
rents are coming down by about 28%. Secondly, on average we’re
taking a four-year term of lease. So, we’re reducing both the risk
and the costs.�

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Next grows profits as rents high streets decline | LandlordZONE.

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Two Manchester 3 bed houses

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PIP is delighted to have been able to secure two discounted investment opportunities for readers, with discounted prices starting at only £152,000.   Our exclusive price includes an upgraded specification, white goods (washer/dryer and Fridge/Freezer) turf and fencing.

According to our Rental Partner

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Landlords urged to make their views heard in licensing consultations

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Landlords and letting agents are being urged to respond to licensing consultations. The RLA aims to respond to all licensing consultations run by local authorities. See below for an up to date list of current consultations and their closing dates and to read our recent licensing consultation responses. The RLA is currently supporting a landlord in […]

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Housing on the Conservative Fringes

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Assuming Parliament goes into recess or the ship is abandoned for the Conservative Party conference to proceed the main agenda published so far does not even include housing policy.

Housing is only listed as a category in the fringe events: click here to view.

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Rental storm-clouds are likely to clear – Brexit or not

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Buy-to-Let:

That’s according
to David Alexander, managing director of DJ Alexander the
Edinburgh and Glasgow based letting agents.

“More
than two-thirds of the way through, 2019 hasn’t been the best of
years for private residential landlords. The threat of rent controls
by some local authorities in Scotland along with creeping taxation
(in the form of a reduction in breaks) by Westminster have brought
gloom north of the Border,� says Mr Alexander writing for The
Scotsman newspaper.

These changes have
been in-part responsible for a UK-wide exodus of landlords from the
buy-to-let market to the tune of around 120,000 over three years,
that’s according to research published by Hamptons International.

However, recent
research indicates a slowdown in those numbers getting out. The
figures show that this year there could be around 18,000 more
landlords selling than there are buying, which compares to nearly
35,000 in the same period last year.

So why is this
happening?, asks Mr Alexander.

“Well, somewhat
ironically, Brexit is playing its part. While some, correctly, refer
to the uncertainty caused to the market by the present goings on in
Parliament, the threat of a no deal departure from the EU is also
largely responsible for a drop in mortgage rates by banks and
building societies, which undoubtedly reduces the monthly outlays
paid by new-entrant landlords or existing landlords seeking a new
mortgage deal with their existing or an alternative lender.

“At the beginning
of the year all the signs were pointing to rising savers rates which
I suppose must have encouraged some landlords (especially those who
originally entered the market with some reluctance) to cash in their
investments in stone and mortar and plump for the “simplicity� of
savings.

“Instead the trend
has been in the opposite direction. Most two-year fixed rate bonds
offered by lenders covered by the Financial Services Compensation
Scheme pay less than 2 per cent while it is now below 1.5 per cent
for notice savings accounts over the same period. By contrast,
according to Moneyfacts, the average two-year fixed interest rate on
a buy to let mortgage at loan to value of 60 per cent has gone down
to 1.97 per cent from 2.1 per cent a year ago,� says Mr Alexander.

If it should
transpire that the UK leaves the EU without a deal, Mr Alexander
says, many believe that the Bank of England will reduce the base rate
from the present 0.75 per cent in an effort to hold back the
prospects of recession – this he says will further increase the gap
between interest earned from savings and net returns from buy-to-let
– even allowing for greater levels of taxation via the latter.

“To those who fear
that Brexit discord will have a negative impact on demand for rented
property, and therefore rental income, I would say that people will
still need a roof over their heads. Indeed during a period of
economic uncertainty folks tend to rent rather than commit themselves
to a mortgage. More existing landlords selling up than buying rental
property could also lead to a drop in supply which would help sustain
rental levels,� he says.

Meanwhile other
research undertaken by Zoopla in June indicates that an average
first-time buyer needs a household income of £54,400 to secure a
mortgage on their first property, £4,500 more than in 2016 and a
national average deposit required currently stands at £38,418.

Although these
figures take in all UK statistics including the higher house prices
and incomes in London and the south-east of England, it nevertheless
shows the attractions and advantages of renting for young people.

Mr Alexander
concludes by saying:

“In a nutshell,
therefore, 2019 is likely to end in much the same way as it began for
landlords but I remain confident that – Brexit or no Brexit –
demand will remain steady and any clouds currently hovering over the
buy-to-let market will recede in time.�

©1999 – Present | Parkmatic Publications Ltd. All rights reserved | LandlordZONE® – Rental storm-clouds are likely to clear – Brexit or not | LandlordZONE.

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SafeDeposits Scotland’s dispute management training tour

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In the last year, 490 disputes have arisen between landlords and tenants in the Edinburgh postcode area according to the latest research from SafeDeposits Scotland.

The deposit protection provider found that the average amount that tenants and landlords in the capital disagreed over deductions to the deposit at the end of a tenancy was £351 and that disputes in the city accounted for almost one in five (18.93%) of all tenancy disputes in Scotland.

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Call of the Week: Assured shorthold tenancies

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Since the introduction of the assured shorthold tenancy (AST), most landlords have been able to use a section 21 notice to regain possession of their property where they have a legitimate reason to do so. However, not all tenancies are assured shorthold tenancies and quite often landlords are not aware that they have something else. […]

The post Call of the Week: Assured shorthold tenancies appeared first on RLA Campaigns and News Centre.

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Welsh Government proposal to shake up rules around size of student flats

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The Welsh Government has put forward a proposal to shake up the rules around converting unfilled purpose built student accommodation into social housing. At a press conference on Tuesday, the Housing Minister Julie James AM said that the Welsh Government will shortly launch a consultation on plans to change the rules around space standards in […]

The post Welsh Government proposal to shake up rules around size of student flats appeared first on RLA Campaigns and News Centre.

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The standard of PRS accommodation has significantly improved

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The standard of accommodation in the PRS has significantly improved in the last decade as the sector has expanded and professionalised. The proportion of homes in the PRS in England deemed non-decent by the ONS has fallen for ten consecutive years

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Should I sell or risk tenants buying at undervalue price?

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Should I sell? What Solutions are there for this Dilemma? I Realise that Nothing has happened YET! But I just want to be clear about what my options are.

Who thought George Osborne would have removed Mortgage Interest Relief!

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