Fashion and homewares giant Next has issued a stark warning, revealing it anticipates a nearly £50 million financial blow stemming from the ongoing conflict in the Middle East.
This significant cost increase, now estimated at £47 million, marks a sharp rise from the £15 million figure provided in March, as the retailer projects continued disruption throughout its financial year, extending until January next year.
To mitigate this impact, Next plans to implement price increases of up to 8 per cent in certain international markets starting from May.
However, the company has assured customers that diligent cost-saving measures will prevent the need for additional price hikes across its UK and European operations.
Next said: “We plan to mitigate the ongoing cost increases caused by the conflict in the Middle East with a combination of moderate price increases in some international territories and operational cost savings.
“Based on our current estimates, we do not anticipate increasing our UK prices over and above the 0.6 per cent we had forecast at the beginning of the year.”
But the group cautioned it may need to change pricing if the war disruption and cost hit worsens.
It came as Next nudged up its full-year profit guidance to £1.22 billion, up from the £1.21 billion previously guided for in March, thanks to a better-than-expected 6.2 per cent rise in full price sales over its first quarter to May 2.
UK sales rose 4.4 per cent in the three months, but growth pared back to 1.7 per cent by the end of the quarter and is set to slow to 1 per cent in the second quarter as it comes up against tough comparisons from a year earlier.
The group said the Iran war was leading to higher transport costs for its goods, in terms of international shipping and also distribution within the UK due to soaring fuel prices, while it is also seeing rising energy prices.
In the UK, it is able to offset these costs thanks to better-than-forecast factory prices.
