Next says prices of its clothes are expected to rise at a lower rate than first feared as it put out a solid set of results.
The high street chain – which has just bought the rights to Cath Kidston – said price rises were set to be “more benign” than previously thought, forecasting increases of 7 per cent this spring/summer, easing back to 3 per cent in the autumn/winter.
It had previously expected the price rises to be 8 per cent and 6 per cent respectively, but said supply chain issues had eased while shipping had also come down. Despite that the business still expects the coming year to be tough.
Only last week the Governor of the Bank of England urged companies to take note that inflation would drop sharply later this year, as they set prices for the year ahead – or risk hurting those on the lowest incomes.
Governor Andrew Bailey said pushing up inflation with high price rises would help no-one and could lead to further interest rate rises.
Next, which has its headquarters in Enderby, near Junction 21 of the M1 outside Leicester, reported a 5.7 per cent rise in pre-tax profits to £870.4 million for the year to January – better than the £860 million previously forecast. Total sales rose 8.4 per cent year on year to almost £5,150 million.
The business, which has 466 stores and a huge online presence, remained more cautious in its outlook though, sticking by guidance in January that predicted a drop in profits to £795 million due to soaring wage and utility bills. It said sales were expected to be 1.5 per cent lower.
Sales in the first eight weeks of the new financial year, it said, were down 2 per cent and forecast a drop overall in the first half of 3 per cent as it compares with a boom in trading last year when Covid restrictions lifted.
Next believes sales declines in the second half will pare back to around 0.2 per cent. Shares in the business were down 7 per cent this morning at 6,232p on the back of the news.
Group finance director Amanda James told the PA news agency that price inflation is settling down.
She said: “I don’t want to say we’re completely out of the woods but, at the moment, it looks far more stable. It feels like we’re experiencing what the wider economy is feeling as well.
“Consumers have got cost pressures. We do think it will be tougher in the second quarter.
“Last year there was a bit of a surge in events, weddings and the Queen’s Jubilee. There was all sorts of things as we all came out of the pandemic and there was also really warm weather.
“I think it’s going to be a challenging year. That’s reflected in our profit forecasts.”
Chairman Michael Rooney said: “We have prepared (and budgeted) for a difficult year.
“We are very clear on our priories. If we continue to improve our product ranges, relentlessly manage our costs and upgrade our customer service, whilst also developing new business opportunities we can lay the foundations for an exceptionally strong business and still deliver healthy profits, cash flow and dividends.”
Ms James said the forthcoming rise in the national minimum wage and wider pay rises in the economy should help boost Britons’ spending power.
However, higher wages are also adding to pressures for companies, with Next’s staff salary bill increasing by £67 million in 2023-24. Power costs also jumped by £25 million, though this was slightly lower than the £28 million extra it had previously feared.
The figures come after Next confirmed on Tuesday that it is buying fashion and homeware brand Cath Kidston out of administration for £8.5 million to add to its fast-growing retail stable, having already snapped up the likes of Joules, Made.com and JoJo Maman Bebe.
Ms James said the group is open to further similar deals.
