Retailer NEXT accelerates warehouse investment programme

By Liza Helps, Property Editor, Logistics Matters

CURRENTLY THE retailer has three warehouses at Elmshall including a new 1 million ft2 facility known as E3. Last year the company reported that E3 had added 50% to its boxed capacity (the items that arrive flat-packed, in standard size cardboard boxes. This type of product accounts for around 80% of Next’s online sales) with the other half of the building left vacant for future expansion. It seems that future expansion has arrvied sooner  than expected.

In its annual results announced yesterday it noted that it had decided to pull forward  the next three phases of its E3 Online boxed programme.

NEXT plc chief executive Lord Simon Wolfson said: “We started placing orders for this project in Q4 last year, and it will continue over the next three years, with a total anticipated spend of £307m over that period. So, this year’s capital expenditure is higher than the long-term forecast we gave in 2024. This is not because we will need to spend more overall, but because we will need to spend it sooner.”

The reasons for this move is based on the facts that online sales grew by 28% over the last two years, against expectations of +10%, in addition to an increase in stockholding of 6%  to give some protection in the event of supply chain delays. At the same time 5% of capacity has been lost through decommissioning and lower box fill resulting from a change in product mix.

Wolfson continued: “Combined, these factors mean that instead of being 69% full at peak, as originally planned, we were actually 87% full at peak. With online growth forecast to be +8% this year, we would be 94% full at peak. In reality, once utilisation rises above 90% the warehouse gets congested and performance declines, so we are alleviating that problem by using our other nearby warehouses to store reserve high-bay stock. This will give us another 7% headroom during those peak weeks.

“In 2027/28 we will add a further 10% capacity, at a cost of £48m. This will give us the headroom we need to service demand next year. In total, the additional capacity is expected to accommodate £1.5bn of additional Online full price sales.”

Looking further ahead to the next decade Next announced that it had acquired an 84-acre plot next door to E3 which has planning for a 1.2 million ft2 warehouse to be known as E4. Wolfson concluded: “We estimate that this warehouse, ‘E4’, would add at least 50% more capacity to the Elmsall complex. Once fully complete, E4 would accommodate around £2.5bn of additional sales. We believe we will be in a position to commence building work by 2028, so that floor space for manual storage could be available from 2029 if needed. New automated E4 packing and picking could be available from 2030 at the earliest.”