UK supermarket giant Tesco is partnering with Next to open a clothing concession in the Tesco Extra store in Surrey Quays, southeast London.
The new 4,300 square foot in-store retail section will feature a range of Next menswear and womenswear.
Tesco, which already has third-party concession deals with Dixons Carphone, Arcadia, and Holland and Barrett, told Reuters that it is looking forward to seeing how customers respond to this introduction.
Tesco Surrey Quays already features its own clothing section, with the retailer's private label F&F fashion line, as well as an optician and pharmacy.
Strategic Deal
UK fashion retailer Next has seen shares fall in recent months, as clothing sales continue to decline.
Analysts say that this deal will only make sense if Next plans on closing a significant number of its stores, or only offer its products in a small portion of Tesco's stores.
"Unless opening additional retail space significantly increases Next’s sales, this could be value destructive," said Boris Vilidnitsky, of Barclays European Equity Research.
"Additionally, since Next will likely have to pay some rent to Tesco, margins could come under pressure as well."
"Overall, we do not believe that Next’s struggles have been due to lack of product availability or difficulty by potential customers to reach the company’s stores or buy its products," he added. "As such, unless this is part of a larger strategy that includes significantly fewer own operated stores, we do not see the benefit."
© 2017 European Supermarket Magazine – your source for the latest retail news. Article by Sarah Harford. Click subscribe to sign up to ESM: The European Supermarket Magazine.
