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The practical steps that Top500 retailers are taking as they prepare for the end of the Brexit transition period

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Image courtesy of Next
Image courtesy of Next
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The practical steps that Top500 retailers are taking as they prepare for the end of the Brexit transition period

How are Top500 UK retailers are planning for the end of the Brexit transition period? We’ve looked at recent financial reports to find out what practical steps retailers from JD Sports to Kingfisher Group and Next are taking in practice, three months out from January.

 

JD Sports

JD Sports Fashion said in half-year results published in September 2020 that it was planning for Brexit by opening a small test warehouse in Belgium that would help it learn how best to shape the group’s European supply chain in the long-term.

 

The 80,000 sq ft warehouse in Belgium is now handling product bound for some European shops. The site is not big enough to handle all of its European stock and does not fulfil any orders for online sales, but it is helping the business to learn as it plans for “a longer-term, more permanent European supply chain strategy”.

 

JD Sports said in the results statement: “We are very conscious that the UK’s transition period with the EU ends at the end of this year and, at this stage, there is a significant risk that the UK may exit that transition period with either no agreement or with perhaps just a very basic and limited free trade agreement. Given the current status of our supply chain in Europe and the fact that 90% of our stock is purchased from international brands on a full landed cost basis, where we have no visibility of the original factory cost, there is some risk of duties being payable for goods which transit to / from countries in the EU. We are currently looking at options to mitigate some of this in the short term whilst we establish a more permanent European supply chain infrastructure.”

 

Kingfisher Group – owner of B&Q and Screwfix

Kingfisher Group, which owns B&Q and Screwfix has an internal Brexit steering committee, which has been in place since June 2016. It said, in half-year results published in September 2020, that it would continue with its planning either for trading on WTO rules, if no trade agreement is reached with the EU, or for a new trading relationship with the EU. Measures that it has taken to mitigate border delays include using more ports for deep-sea imports and working to access simplified customs procedures. It is talking to its suppliers to ensure they are ready to operate if there is a hard EU border with the UK.

 

If no free trade agreement is reached, and the UK’s new global tariff – as published in May 2020 – is applied, Kingfisher says that it expects its products, imported both from within and outside the EU, would attract an average tariff of about 2%. “This would be slightly lower than the current average duty rate for all direct imports into the UK,” it says. It also says it has seen no significant impact on either retention or hiring following the 2016 referendum. “We will continue to monitor the status of the negotiations and review and adjust our contingency planning accordingly,” it said.

 

Next

At its half-year results conference, held in September, Next chief executive Simon Wolfson said that it had set out its full approach to a no deal Brexit the previous year. “No deal is no deal,” he said, “and our preparations remain the same”.

 

Last year, Next said in its first-half results that the biggest risk to the UK economy is the effective operation of ports, especially Dover. “If our ports operate effectively, we can see no reason why a no-deal Brexit should materially affect the short-term economic life of the country,” said the retailer. It pointed to the UK government’s Transitional Simplifed Procedures published in March 2019 as an example of a step taken to reduce the risk of port congestion.

 

Next itself has authorised economic operator status in the UK and its UK warehousing is already bonded. “We have relatively little of our stock arriving or leaving the UK via the Dover Calais route and as a precaution we have already taken measures to move most of that traffic to alternative ports or airports,” it said.

 

It concluded: “A no-deal Brexit is not our preferred outcome. That said, as long as our ports continue to operate effectively, we do not believe that the risks of a no-deal Brexit pose a material threat to the ongoing operations and profitability of Next’s business, here in the UK or to our £233m turnover business into the EU.”

 

Beyond the Top500: Primark
Associated British Foods said in a pre-close trading update published in early September 2020 that its business had fully prepared for Brexit, whether the UK leaves with or without a trade deal. Its Primark clothing business is not listed in RXUK Top500 research since the retailer does not sell online, but its plans will still be interesting for those multichannel retailers who operate stores.

 

“Primark,” it said, “operates largely discrete supply chains for its stores in each of the UK, US and Europe and the group’s food production is largely aligned with the end market. As a result there is relatively little group cross-border trading between the UK and the EU. Contingency plans are in place should some of our business experience disruption.”

 

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