What next for Next’s dividend?
Retailer Next has announced that it will be closing all its shops for now. What does that mean for its dividend?
Lord Wolfson, Next’s CEO, has said that the retail industry “is facing the toughest time since the oil crisis of 1973”, says Ashley Armstrong in The Times. This crisis will cost the group up to £1bn. This week it announced that it will be closing all its shops for now.
However, Wolfson is confident that it will be able to survive thanks to a strong balance sheet; it also has options such as suspending its share-buyback programme and dividend, and delaying capital spending.
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Good idea, says Ben Marlow in The Daily Telegraph. While there is “no way of predicting what effect Covid-19 will have on the industry”, Lord Wolfson has “been wargaming for years” to prepare his company for the “multiple doomsday scenarios” facing the high street. He has produced a “15-year stress-test of Next’s prospects” that is “astonishing in its scope and detail”. Given his realism, it is not surprising that Wolfson’s statement has pushed up Next’s shares.
Not so fast, say Jamie Nimmo and Harriet Dennys for The Mail on Sunday. It’s true that cutting or suspending dividends will help companies such as Next “to weather the storm and protect jobs”. But consider the bigger picture.
The news that “one of the high street’s strongest” firms is contemplating delaying its payout to shareholders is hardly good news for investors. Analysts warn that if Next is thinking of cutting, dividends, then “frankly pretty much no one is safe”, as even the biggest dividend payers in Britain “could be forced to follow suit”, with investors facing “billions of pounds worth of cuts to payouts”.