May 7, 2020 / 6:50 AM / 21 days ago

Next enters British beauty contest in former Debenhams stores

LONDON (Reuters) - British clothes retailer Next (NXT.L) will open five standalone beauty halls in former Debenhams stores across the country as a first step in its ambition to become a new force in beauty retailing, the company said on Thursday.

FILE PHOTO: A Next store is pictured on Oxford Street as the spread of coronavirus disease (COVID-19) continues in London, Britain, April 15, 2020. REUTERS/John Sibley

Next will be taking on Boots, Superdrug, John Lewis and Debenhams itself in a health and beauty market worth 22 billion pounds ($27 billion) in 2018 and forecast to grow nearly 17% in the five years to 2023, according to researcher GlobalData.

Despite the coronavirus lockdown and huge recession on the horizon, Next snapped up the space in five shopping malls owned by Hammerson (HMSO.L), seeing an opportunity for growth by extending its online beauty business to physical stores.

The move by Next is a sign that retailers with stronger finances are taking advantage of opportunities as weaker rivals battle to survive the pandemic.

Last month, Next sold property, suspended share buybacks and dividends and delivered higher cost savings to shore up its finances after its first-quarter sales plunged 41%.

Shares in Next, down 32% so far this year, were up 3.2% at 1323 GMT on Thursday, while Hammerson was up 0.9%. The mall operator’s shares have fallen more than 80% since December.

Struggling department store chain Debenhams, which is in administration, said on Wednesday it would not reopen the five stores leased from Hammerson after failing to agree rent terms.

All Debenhams and Next stores in Britain are currently closed as part of the country’s lockdown to reduce the spread of the coronavirus.

‘BEAUTY HALL’

Next said it had signed new flexible leases with Hammerson for space in the flagship sites at Bullring & Grand Central in Birmingham, The Oracle in Reading, Highcross in Leicester, Silverburn in Glasgow and Centrale in Croydon.

Next will brand the space “The Beauty Hall from NEXT”.

“This is an exciting opportunity to work with existing and new beauty brand partners to create a new force in beauty retailing,” said Next Chief Executive Simon Wolfson.

Next said it aimed to create a premium retail environment for beauty to complement its existing online beauty business, which sells over 200 brands, including Estee Lauder, Clinique, Benefit, Origins and Elemis.

Next joined forces with Fabled by Marie Claire to launch an online beauty business in 2018 and then bought Fabled from Ocado (OCDO.L) last year.

Next does give a breakdown of its revenue. However, beauty would have made a small contribution to the company’s overall 2019-20 turnover of 4.4 billion pounds.

Next also said it was in talks about adding a small number of further sites.

Slideshow (2 Images)

It said it was likely that many of the former Debenhams’ beauty staff would be employed by Next.

“This is another example of how we are repurposing department store space,” said Hammerson Chief Executive David Atkins.

Hammerson, which saw a 400 million pound deal to sell seven UK retail parks to private equity firm Orion collapse on Wednesday, said it would pursue opportunities to repurpose the other floors of the former Debenhams stores, as it continues to reduce the amount of department chain space in its portfolio.

Reporting by James Davey; Editing by Jan Harvey and David Clarke

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