In a critical update, the prominent clothing and homewares retailer has warned that several of its stores may face closure following a landmark £30 million equal pay ruling.
The FTSE 100 retailer announced in its recent half-year report that the ruling could significantly impact the profitability of individual stores. Last month, an employment tribunal ruled in favour of 3,540 current and former female store staff who claimed they were paid less than predominantly male employees in warehouses. The company is appealing the decision, which dates back to October 2018, and has expressed confidence in its legal grounds for the appeal. However, it acknowledged that the case could take more than a year to resolve.
This landmark ruling is the first of its kind against a British retailer, potentially paving the way for further claims. A similar equal pay case involving over 60,000 employees at another major company is set to conclude early next year. The recent report highlighted the potential ramifications of upholding the ruling, stating that “some of our stores will no longer be viable if this ruling is upheld on appeal. Increased operating costs will lead to more store closures when leases expire and will hinder new store openings.”
The retailer also raised concerns regarding its warehouse operations, indicating that wage increases in warehouses would necessitate corresponding increases for store staff, further impacting the cost structure. Despite these concerns, the chief executive, Lord Wolfson, clarified that the intent is not to issue threats but to address the financial realities of store profitability. “Whether we open or close stores will depend on each individual store’s profitability,” Wolfson explained. He noted that many high street shops have shut down over the past decade due to rising costs and declining sales.
Operating 458 stores across the UK, the retailer does not employ workers on zero-hours contracts but instead offers additional hours to existing staff during peak periods such as Christmas.
This ruling introduces significant uncertainties for the retailer, with potential repercussions extending beyond store closures to broader operational challenges.